RSI High-Low

No trading system
can depend on the
RSI indicator
solely on its own.

However, the use
of the RSI, in
conjunction with other statistical tools and proper technical
analysis, can provide you with an extra edge to your trading.

Setup:
Currency pair: Any. Time frame: Any. Indicator: RSI (14, 70, 30)

Entry rules:

Buy when the RSI crosses below its 30 line, forms a bottom, and then
crosses back up through 30.

Sell when RSI has crosses above 70, forms a peak, and then crosses
back down through 70.

Exit rules: Ideally, when the next opposite BUY/SELL condition is
encountered as just defined.

RSI is a very good indicator for identifying Entry and Exit points
for both simple and complex trading systems.

However, careful monitoring is needed because false signals can occur.

This strategy is best used in combination with other statistical
indictors.

There are additional problems to consider such as :-

1. The market will not realize that it may be above 70 or below 30.
As a result, further large movements can still happen after these
conditions are met without the anticipated reversal occurring.

Although these movements may only cause just a few points rise in
the RSI value e.g. 71 to 76, the market could surge by another
200 pips or more.  If you had set a new SHORT at RSI 71, a
violent BULL action could quickly STOP OUT your new trade.

 Stochastic lines crossover

The Stochastic technical indicator is very effective at determining
Entry and Exit points if the Market is following a structured
statistical pattern.

Currency pair: Any  Time frame: Any Indicator: Stochastic (14, 3, 3)

Entry rules: Enter a new trade when the faster moving Stochastic
line crosses above or below the slower moving one.

Exit rules: Exit the trade when the opposite crossovers occurs.

The Stochastic provides well defined entry and exit points and
is easy to use.

However, the Stochastic is a lagging indicator and, as such,
it can create false signals.

Traders may need to monitor and even change Stochastic settings
constantly in order to adapt to the ever-evolving Market conditions
with the intent of minimizing the number of false signals.

Again, there are more problems to consider:

1. In a similar way to the RSI, the Market could surge in the opposite
direction of a Stochastic crossover. This is more of a problem than
with the RSI because the Stochastic lags real-time.

2. If the total time between the entry and exit crossovers is quite
long, this will leave the trade vulnerable to large spikes in price
movement.

The Stochastic would respond very slowly to such events and, as a
consequence, would fail to advise you quickly enough that you need
to consider corrective action promptly.

Good Luck with your Forex Trading.

If you have any queries, please leave a comment and
I will do my best to answer it.

Regards,

Terry Allen 

Please be advised that Foreign Currency trading involves
substantial risk of monetary loss.

All information contained on this website is provided as general
commentary and must not be constituted as investment advice.

I will not accept liability for any loss or damage, including
without limitation to, any loss of profit, which may arise directly
or indirectly from use of or reliance on this information.