Hi All
I am now well into my third month demo trading and made the decision to trade Price Action with no indicators. Month 2 was very successful, this month has not been kind at all. Amongst the many forex blogs I receive on facebook and by email, I received a couple of interesting blogs (tagged below) from onestepremoved.com which, caught my eye and, in my opinion, are well worth reading.
Developing a System Around an RSI Entry Strategy - MT4 Programming
Cumulative RSI System - MT4 Programming
In essence it describes research by Messrs Larry Connors and Cesar Alvarez regarding short term trades using Relative Strength Index based on a 2 day period targeting markets (stocks and ETFs in their case) which were above the 200 day Simple Moving Average. As I understand it they formed the Cumulative RSI System which enters a long postions when the RSI(2) falls below 35 and an exit at 65.
Having too much time on my hands, I set about changing the settings on my RSI indicator and applying it to my charts. I have now spent a few hours “playing with this” and I believe using the RSI(2) indicator may have some merit for entries. I have looked at entering long when the RSI(2) moves above 10 and also 35, and I have looked at going short when the RSI(2) moves below 90 and 65. With these numbers being the trigger points. But perhaps the most interesting entry would be to enter when the RSI(2) reverses ie enter a short when the RSI(2) reverses by 4 or 5 from its current high and enter a long when it reverses by 4 or 5 from its current low. For exiting, I would suggest a set amount of pips. Most trades would be open for 1 - 3 days, depending on your target. I havent yet worked out a Stop, apparently the authors recommend trading without one!
I think the only way to see if this strategy works would be to build an EA or an indicator but if any of you reading this, have time to apply the RSI(2) to your charts and take a look at the possibilities I would appreciate your comments and recommendations.
Many Thanks
Andy