I have a questions regarding the stochastic.
Does the stoch have to break 80 or can it just touch it and the reverse down through the signal line.
Take a look at USD/CAD. (4hr)
It’s showing the stoch sat right at 80 and then started to move back down. If it crosses the signal line and the RSI below 50, would this be a good opportunity?
Yes this is a good signal. You just need stochastic to cross over 80, then cross below the signal line. As a friend though, I advise you (shall you take this position) to close it before the coming Wednesday. We have probably the most important event of the past 2 or 3 years which is that the US could increase interest rates. If they increase it, USD will go through the roof and it will be one of those events that blows out your account.
Great job keeping your emotions in check :35: . On more than one occasion I have broken the rules of this system and regretted it the very next day. Trading psychology is not easily mastered…
Hello everybody, I have been reading only so far as I am a complete noob, started school a month ago, and I am trading on a demo account since then. First of all I want to thank Philip for sharing his system. I have a very stupid question but i just can’t understand what I am doing wrong. I am using the mt4 platform, I have added all the extension levels to the fibonaci retracement tool, as far as I understand in an uptrend you have to draw it from low to high but when i do that all the extension levels are below the low and they need to be above the high as this is where you take profits, should i just draw it from high to low then. Here is a picture so you know what i mean. Thanks very much.
Hristo
I have been silently (and gladly) following this thread. I just registered and would like to make my first post on baby pips. First and foremost, I would like to thank Philip for sharing this system, awesome system.
Secondly, I lost track of the thread somewhat in the middle and still unclear about RSI rules. I am really really confused on that. Firstly, i read a conversation referring to 50 RSI filter on weekly/monthly. Then about the 40-8- rule for long and 30-60 rule for shorts on 4h tf, and then the 66.66 and 33.33 rule for trend validity.
I guess many others are also contused like me. I would like to request Philip on behalf of all those and myself to once write down the RSI rules in detail again i.e. make a detailed post on RSI rules with all details including the time frame to use etc.
Thanks in advance :)))):63:
Well Radev your theoretical understanding is correct. In an uptrend, you draw from the low to the high. This is to get the retracement levels. To get the extension levels, like you said, you draw from the high to the low in an uptrend.
Ok Amira, these rules I’m about to mention apply to all the time frames. You need to draw four lines on the RSI. 80, 66.6, 33.3, 20. Now I have my own RSI indicator on tradingview with everything set. Needless to say its free, because I don’t make money out of traders, I make it out of trading. So if people find it easier they can add me or reach me on Trading view and I’ll share the indicator.
Firstly, in my opinion, what is the RSI? It is a tool to measure the strength of buying in a given currency pair or financial instrument. So when we say EURUSD’s RSI is 60. We are basically saying that the strength of buying of the EURUSD at the moment is at 60 compared to the last 14 periods.
Now as a general guideline, I found an objective way to determine a trend. That observation then became the foundation of the RSI rules. So what is the rules?
When stochastic is oversold, RSI should be oversold. When stochastic is overbought, RSI should be overbought. Now RSI overbought level is 66.6+ and its oversold is below 33.3.
So what happens if stochastic is oversold, but the RSI does not reach oversold? It means we are in an uptrend. Why? because the fact that RSI remained above overbought, indicates there is buying strength. Let’s show an example:
This eight-point plan describes how to follow the trend using the stochastic and RSI. Just read from point 1-8 and compare the RSI and stoch at each point to see what I mean. Any questions on that is welcomed.
So this was the foundation of the rules, if you understand them I don’t think you will get confused.
Applying this to my system, we understand that price makes an impulse move (where 20 EMA crosses above 50 EMA or below it). Price then makes a retracement, we check the RSI during that retracement. We want the RSI to [B]NOT FOLLOW THE STOCHASTIC.[/B]
So for example, let’s say 20 EMA crossed above 50 EMA. stochastic was overbought, [B]RSI should be overbought (66+)[/B] stochastic goes to oversold, [B]RSI should not be oversold.[/B]. You enter at the cross of main and signal lines of the stochastic.
This is really what it is. Rather than bore you with all that. I just gave you a simple guideline of above 40 or above 50 which you can’t go wrong with either.
But you had your way Amira 
now everyone knows most of what they need to know on that subject provided you study the link I gave.
Questions are welcome.
THANKS PHILLIPS so we can buy when RSI is above 40, however it is better to have it above 50 and vice versa.
We can. The most important thing is that you follow the behavior of the RSI once stochastic is overbought. If RSI is overbought (66.6+) then the trend is healthy.
Everyone else clear on that?
What is your RSI setting? do you use default setting? I barely can’t see RSI is over 50 when the buying signal occurs, and vice versa
Its the default. I just explained the entire idea behind the RSI filter in the previous page. You can read it because I do not mention the 50 level once.
Hello,
Would you recommend a sell on NZD/CAD? It just signaled (with a very good RSI). The reason I ask is b/c this last signal was the 3rd one while the 20 EMA is below the 50 EMA?
It’s fine to enter on the third signal. I just prefer entering the first signal.
are there any tools to scan the marked for where 20 and 50 EMA are crossing?
or do you just look at every chart there is?
ofc time is on your side with the strategy but still…
I look manually.
It’s always a good idea to spend time in front of charts to get a feel for the market. But, if you want to automate the strategy a bit, one option would be to open charts for all currency pairs you intend to trade and attach an EA or custom indicator that alerts you when the EMAs cross. You can go to the MQL5.com website and search for an indicator, or you can build your own using tools like the one found here: Home | FxPro Quant
That is so difficult to use~but thanks for sharing.
spend the last 5 days backtesten this system and i only found 1 case where i wasnt sure if it would profit or not…
so thanks so much for sharing it!
are all currency pairs a option for you? or are you just looking at a handful?
and about USDCAD. you mentioned earlier something about getting out of it before wednesday? what news is it that make that one blow?
again… thanks for the system! love it!
Yeah I trade all currencies except manipulated ones. Chinese Yuan and Swiss Franc for example.
The Fed could raise interest rates on Wednesday.