RSI Forex Strategy

RSI stands for Relative Strength Index. It belongs to the class of oscillators, that is to say, it can give a graphic representation of market power. And an increase in the curve course does not necessarily imply an increase in ROI. ROI used to calculate the relative strength of the market, and so give signals overbought or oversold. If a value is defined as the oversold RSI method, this means that it is theoretically to the purchase price because it can not long remain oversold. In the opposite direction, a value will tend to see overbought RSI its fall in the near future.

Its calculation

Developed by JW Wilder in 1978, his math is pretty simple.

With: x (s): An RSI, as most of the technical indicators can be decreased depending on the time horizon of the investor. ROI in 5 days will observe changes in short-term courses. The contrary, 14 days RSI indicators will in the longer term.

  : Average increases over the period studied.

  : Average declines over the period studied.

How to use

I represented a hourly chart with the RSI EurUsd blue. When the RSI falls below 25, we can expect an increase because the RSI is oversold. Conversely, when the RSI is above 75, we can expect a decline because the RSI is overbought.

This approach is a qualified "contrarienne." Assumes that all prices do not go up forever in an uptrend and in the same way, the course will not fall forever in a downtrend. This is quite realistic, even in an uptrend, prices are subject to profit taking before rising again (or go down and change trend). Strategy "contrarienne" is in my opinion enroll in short-term perspective with respect to the time scale.

This means that on an hourly chart, I will position a few minutes to an hour or two. Monthly on a graph, I will position a few days to a month or two ...

Note: Another way to use the RSI and look for discrepancies. I will not detail this method in this article.

A winning strategy?

Should I conclude that if the RSI rises above 75, I have to sell? There are still many questions to ask yourself before making this decision.
 The advantage is that I?
 I accept the loss if it goes wrong?
 The number of lots that I bet?

I've seen often enough to mention ROI "stuck" for several hours over 75 that shorter without stop with only one reason RSI above 75 can lead to large losses.

Consider a strategy is simple, when the RSI falls below 25, I take a buy position and I is a profit of 10 Pips. If I continue down the course I take my loss ...

If the operation ends in a loss, is that the RSI has continued to decline at around 20 perhaps less. I expect that in this case they go back and the RSI back above 30 to take a new position.

If the operation ends with a gain is that the RSI rebounded somewhat. If during rebaissent, then I take position.

The UK inflation for August is reducing

The annual rate of inflation in the UK, as measured by the consumer price index, fell to 2.5 percent in August from 2.6 percent the previous month, said the British Office for National Statistics said on BBC.

The index of retail prices, which includes housing costs such as rent and mortgage payments, a decrease to 2.9% last month at 3.2 percent in July. The delay is mainly due to slower growth in prices of furniture and gas.

In July, consumer price inflation accelerated unexpectedly, but the trend is slowing steadily since peaked by 5.2% in September last year.

The statistics office said that slower growth in clothing prices also contributed to the favorable outcome, while in July it registered record highs. This has helped to compensate for a rapid increase in oil prices and the railway, which in August fell
Analysts had expected inflation to slow in July, since then the air fares rose and auctions ended earlier due to the summer Olympics in London. Now they argue that inflation will fall, approaching the goal of the Bank of England by 2%.
James Knightley at ING said that despite pressure upwards of raw materials, fuel and food prices, it expects inflation to reach "a little more low end of the year."

Peter Dixon of Commerzbank agrees with him: "From now on it should for a while to see lower levels."

Analysts predict that slowing inflation will reduce concerns that the policy of the Bank of England to funnel money into the economy to stimulate demand may lead to its acceleration.

Britain's economy shrank in the last three quarters and the financial institution announced a further easing in July, bringing the total volume infused funds into the economy under the program for the purchase of assets to 375 billion pounds.

Some analysts suggest that this volume could rise before the end of the year as the economy struggles to get out of recession. "We doubt that the outlook for inflation will persuade the bank to announce additional purchases of assets by the end of the year," said Samuel Tuum at Capital Economics.

Trading against the new

WHAT TRADE against new

When trading the news calmly wait for the data to be published, the market will react after the initial spike play in the opposite direction to catch a pip of correction. The aim is determined by the length of the spike, usually about ten pips.

What new?

Any news that deflect the market with 30-something is a good touch. These are primarily U.S. News - NFP, Retail Sales, CPI, Interest Rate Decision. The sensitivity of the market to macroeconomic news is different. In a sensitive market can be traded against a minor news.

WHO currency pairs?

I traded against the U.S. News in crosses. Always trarsya currency pairs with tight spreads and this limits the selection to two muddy - EURGBP and EURJPY.
EURGBP is safe for trade currency pair. There movements are smaller, which reduces the risk. The smaller and profits.
EURJPY is my preferred pair to trade against the news. The yen reacted more calmly to the news of the states (solutions base rate may be an exception) and movement in it is more gradual. The euro reacted immediately and then corrected. The result is a nice adjustment to the initial spike in the EURJPY. It is this adjustment is our goal.

Agent ...

It is vital to choose a FOREX broker fixed spreads. Otherwise spreads during the news would be so broad that virtually obezmisli to the risk. Most brokers will not make any problem for at least several months trading. Then begin requotes. It's time to change the broker or account.

MONEY MANAGEMENT (MM)

This strategy requires konsvervativen MM. Everyone has to decide what is the maximum exposure that can take. Start small. For me it is too risky to trade this method effectively leverage higher than 1:50....

Arbitrage Forex Trading

Arbitration

Arbitrage is the simultaneous buying of one currency with a broker and selling it to another broker. To fetch, ask the price of the first agent must be lower than the bid price of the other agent. After buying the first broker and sell the second, waiting to catch the price and the closing piece rates. One deal will be profitable and the other a loss. Loss will exceed by 1-2 pips profit. This is our total profit.

RISKS IN ARBITRATION

Differences usually occur in a very short time, often in seconds. This time must be signed two deals - one for each forex broker. After leveling of prices, positions should be closed, which needed 2 more transactions.

Even in one of four all transactions should be requotes, it will put the market risk.

Example: We want to sell EURUSD at 1.3002 and buy at 1.3000. Sell ​​at 1.3002 with a broker, but other brokers and buy our Requotes of 1.3002. This leads to zero results. Decided to close positions to free margin. Close the long position without a problem, but closing the short position our broker requotes. We can swallow Example 1 pip loss or at the mercy of the market.

Does it make sense to arbitrate?

In his aforementioned classic look arbitrage involves taking a real risk. But it is meaningless in spazvalneto certain rules.

1. It should be dealing with niskovolatilen market - for example, in early Asian session after midnight local time. Then the average life of a quote is much longer than in European and Asian volatile session. Most inert is the market before the opening of Tokyo (3:00 EST In the summer, 2:00 EST in the winter. In Japan do not change during summer and winter)

2. It is desirable to use FOREX brokers with fixed spreads - eliminating the risk of widening the spread, which is common in illiquid markets.

3. It is recommended to trade with European and American crosses crosses - Majors and yen crosses are relatively liquid and volatile even in the Asian session.

The next issue will look scalped. For most traders it is simply trading for small profits multiple (perceptions of "small" varies between 2 and 20 pips). For my scalp is an enhanced version of the arbitration.

Carry Trade

The essence of strategy "carry trade" (Carry Trade)

The simplest definition of strategy "Carry Trade" is taking the loan at lower interest rate and investing the funds at a higher interest rate. Thus, profit is the difference between the two interest rates. So in theory, without investing its own funds, we can capitalize on the big win. Strategy could be applied to the Forex market and the bond markets.

In Forex trading speculator borrow money in a currency with low interest rates and buy currency with a higher interest rate. Most often, such as low interest rate currency today using Japanese yen as the country's interest rate is only 0.1%, making it one of the lowest in the industrialized developed world. In comparison, rates in Australia and New Zealand often exceed 6%. Speculators borrow in Japanese yen, you pay an interest rate of 0.1%, and put money in Australian dollars, which gets 7 percent rate. Interest payments are made every day, even if it is not obvious at first glance. All open positions of traders are closed at the end of the day the spot rate, then they are immediately detected again by the intermediary broker. Account speculator is charged or credited to interest payments on the differential between the two rates of interest. This amount represents the cost of transferring the position the next day. It is important to otbelezhem that interest rates are quoted on an annual basis. In case the interest rate spread, the difference between 7% interest in the Australian dollar and 0.1 percent for the yen, which traders will be realized (7% -0.1%) / 365 = 0.0189%.

The ability to trade on margin provided by Forex brokers make the strategy "carry trade" is especially popular. Leverage to trade the currency markets is often 1:100. This allows for a huge profit.

But all this lies a great risk. The biggest danger of course is that the currency you bought suddenly lose value against the one you sold. As we saw the Australian central bank attempted to weaken the Australian dollar, precisely because traders carry significantly increase the price of the currency. The risk of "carry trade" the Forex market can be reduced with the use of stop orders in which speculator pre determined level of loss you can tolerate. This is also the hedge contract with the forwards, but this is likely to lead to zero profits because the theory of interest rate parity.

There are several things that need to be monitored by speculators using this strategy. On the one hand, they should ensure that they buy the currency with the higher interest rate and sell this to the lower. On the other hand, they need to analyze economies offering both currencies to ensure that the market will move against their positions. That is, speculators looking to buy the currency of a country with a strong economy, and to sell the currency of that which is in difficulties or is expected to happen.

Normally, a country that offers higher interest rates to attract more capital as investors prefer higher returns. With increasing interest in a country, will create a positive flow of capital, which will lead to appreciation of the value of the local currency. So the main purpose of speculator relying on "carry trade" is to successfully predict changes in interest rates.

Conservative scalping

The author proposes to use the M10 as the main and H4 as helper. Since in metatrader no M10 in my examples I will use the M15, I think that a small elongated main timeframe will not have much effect on the results of the strategies. 
We work on the major currency pairs (5-10 minutes before the release of important economic news, in case the profitability of our position, move the stop-loss to breakeven when the news after the price has gone in the wrong direction - looking for possible coup or a new position. Open new positions for 30-60 minutes before important news is not recommended). 
Tools 
This strategy uses a number of tools: moving averages of different periods, stochastics, MACD, and the indicator Ichimoku. 
Now let's look in more detail. 
On the schedule for the period M15 add: 
1. Envelope of EMA34: median and two shifted relative to the y-axis at +0.21% and -0.21%. 
2. EMA144 - home. 
3. EMA72 - auxiliary. 
4. Stochastics with parameters (13, 5, 3) + oversold level 20 and level 80 overbought. 
5. MACD indicator with parameters (21, 34.5). 
After adding all of the above tools on schedule with the period M15, he dlzhen purchase the following: 

On the schedule for the period H4 add Ichimoku indicator. We use only the line Tenkan and Kijun. 
After adding the Ichimoku chart for the period H4 dlzhen he purchased the following (leaving only the line Tenkan and Kijun, all other lines made colorless, not to litter schedule): 

General view of the working window will get the following: 

Operation 
1. Determine the trend (lack of) at H4 with Ichimoku. We are trying to open in his direction. 
2. Identify signals on M15. Obtain a pneumatic signal and input signal using Stochastics, preferably fed from areas of overbought / pereprodainosti (especially fletovogo plot), as an additional (backup) MACD oscillator is used to refine the input. Opens as a market, and orders. Lot size, S / L and T / P, topping and averaging, coups and Loki - according to their own MM (in the book he was some ambiguous ...). 
Now we will try to deal with the trading signals. The signals in this strategy we will have fenders. 
Pneumatic signal - a signal that occurs when the price of a technical guide and rebound from it. In our case, the technical guide will be moving averages. What are the signals we will work depends on the state of the market. Are fundamental for our two states - trend and fletovy. 
The author identifies three market conditions: 
1. Trending portion of the market. 
2. Fletovy portion of the market. 
3. Ambiguous area of ​​the market. 

After the identification of the above areas, we go directly to the preparatory work for finding the optimal entry. 
Determination of the trend of the market area: 
Gl 144 EMA is outside the envelope or envelopes one boundary (the distance from the middle to the border of the envelope up to 5 points). 
Auxiliary-72 EMA starts to approach one of its boundaries. 

-With up-trend up to the median EMA, then - supporting the EMA, the lower boundary of the envelope, and at the bottom - the main EMA; 
-When down-up trend is a major EMA, the upper limit of the envelope, then - supporting the EMA and then the median EMA. 
-You should also pay attention to the angle of movement means, on the trend interval averages are moving in the same direction at an acute angle. 

Determination beztrendovogo (fletovogo) part of the market: 
- Home 144 EMA and the 72 EMA support are within the envelope in the horizontal position, ie moving averages are woven, and the distance between them is less than 20 points. 
-The shorter the distance between the movers the more pronounced "outset". 

In principle, the identification of the trend and the market in fletovogo strategy "Conservative scalping intraday" all clear, and after a few hours with the schedules it can be done without problems. Next you need to consider directly the trading signals. The strategy "Conservative scalping intraday" used fender signaly.Vot quote from the book "The Conservative scalping intraday" - "method to achieve price levels (cluster level) in the" bounce rates "from them, then the system is sliding door stop." 
The strategy "Conservative scalping intraday" There are 3 types of pneumatic signals 
1. Demolition signals from EMA: 
-Simple (prices rebound from one of the EMA); 
-Complex (release rates from multiple EMA). 
2. Demolition signals from the envelope: 
End-prices from the top of the envelope; 
End-prices from the bottom of the envelope. 
3. Combined Demolition signals: 
Oochetanie-pneumatic signals from the EMA with the lights out from the boundaries of the envelope prices. 
When the market is in a trending condition should be given priority pneumatic signals from EMA slozhnym.Takzhe simple and if the market is a strong trend, while 144 and 72 EMA are outside the boundaries of the envelope and the main line of support or resistance will be the 34 EMA. 


When the market is in a state fletovom should prioritize pneumatic signals from the envelope. 

We now examine the work with oscillators used in the strategy "Conservative scalping intraday" 
The main indicator of the strategy appears stochastic, auxiliary supports MACD. 
Signals to buy: 
Home-stochastic line breaks oversold level 20 upwards 
-Main Line breaks MACD signal line from the bottom up 
Sell ​​signals: 
Home-stochastic line breaks overbought level 80 down 
- Main Line MACD signal line breaks down 
You can also use the "bear" and "bull" to confirm the divergence of pneumatic signals. 
Example of a buy signal for the pair GBPUSD. This signal was formed on the bottom of the envelope. As we know, the work of border envelope is only when the market is in a state fletovom, ie the main movers (144EMA) and support moving (72EMA) must nahoditsyavnutri envelope medium and the distance between them must be less than 20 points. 


For the signal we want the price was either at the top (for sale), or at the bottom (to buy), and the channel must be either Stochastic overbought> 80 (for sale) or oversold <20 (for purchase ). Signal is generated when the line breaks the fast stochastic zone data. 

It is also necessary that, after the signal candle closed within kanala.Esli all these conditions are met, to transact. After the transaction set a stop-loss for the purchase by 1-2 points below the low of the last two candles for sale by 1-2 points above the high of the last two candles. Profit target set by the opposite of the channel. 

The following example signal to sell the currency pair EURUSD. In essence this is a complex pneumatic signal from the 72 and 34 MA. The pair is in a trending condition. 144 EMA was outside the envelope, 72y moving average is above the 34go. Price went up to resistance at 72go and 34go MA, Stochastic entered overbought zone and struck level 80 down. Thus was formed a sell signal. 

Open the transaction to sell, stop-loss of 1-2 points higher than the highest peak in the last two candles....

Free Candle Strategy

In this article we will look at forex trading strategy for intraday work "free candle". This trading strategy is designed to operate on 15-minute charts and is quite a handy tool for working in the currency market, which can effectively make decisions and close deals with a good positive mathematical ozhidaniem.Osnovoy this trading strategy is the concept of "free candles." For the definition of "free" spark we need exponential moving average with a period of 9 superimposed on the 15 minute chart. In the description of this trading strategy we will use the 15-minute chart of the EUR / JPY forex. So, what is a "free" candle:

body and the shadows of the candles do not touch the middle
closing price of the candle should be higher than the previous high (for bullish) or below the previous low (for a bearish trend)
Watching the 15-minute chart, the first thing we determine the current trend of the slope of the moving average. After that define candles, body and which do not relate to the shadow moving average. This so-called "free" candle (free candle).



We define "free" candle can begin preparations for a sdelki.V our trading strategy to go long (buy) on forex, we need a free white candle, which is above average. If the closing price of the candle is higher than the maximum price (high) the previous candle, at the opening of the next bar, you can open a long position.

For a short position (sell), we need a free black candle, which is below average. If the closing price of the candle is lower than the minimum price of the previous candle - at the opening, you can open a short position.

Manage your

Once we opened the position we need to put a stop loss and take profit. For a long position we put the stop loss to the minimum free candles. Further monitor the situation and, if the floating profit on the position reaches about 70% of the initial risk can be transferred to the stop loss to breakeven. For a short position doing the same thing. Stop-loss set at a maximum of free candles and, as soon as the floating profit is 70% of the initial risk, we will move the stop to breakeven.