Market Accurate
Learn the profitable RSI crossover strategy, which can be used on all time frames and is based on trend, price action, and momentum. The strategy uses three moving averages as dynamic support and resistance zones. Find cross downs with good momentum and trade with a risk reward ratio of 1:1.5 to 1:2. Use the Bollinger plus RSI and RSI plus backlight indicators to filter fake signals and understand market trends. The strategy has a 63% win rate with a risk of only 2% per trade, and the video includes results of a 100-trade test on GBP/USD.
RSI Crossover: How to Trade it Profitably
Introduction:
In this video, we will discuss a profitable strategy that you can use with the RSI indicator. The RSI crossover is a very simple and famous strategy, but most traders are actually trading it the wrong way. We will explain how to use this setup, step by step, and teach you each and every detail.
The Setup:
First of all, open the tradingview.com website and then select the GBP JPY currency pair. We will set our time to the five minute time frame for this strategy, but keep in mind that you can use this method on all time frames and this strategy can be profitable on all of them. This strategy is based on the trend, price action and current momentum. Three different moving averages work as dynamic support and resistance zones.
Adding Indicators:
Now it’s time to add indicators to our chart. Go to the indicators menu and search for PP Signal Super Smoother Haikanishi. Now go to the indicator setting option and disable some options. Our first setup is ready. We will use this indicator as dynamic support and resistance zones.
The Rules:
The first rule is that the price should cross the moving average zone from above to below. This indicates that the current trend is about to change from bullish to bearish. However, this does not exactly confirm the reversal movement. Price may come back to the previous trend. When a large move like this takes place, the price retraces to a higher level 93% of the time. Many times you will see that the market price crosses upwards and then quickly returns back to the zone. Or, sometimes a bullish candle closes above the zone and the next candle immediately goes to the zone. These scenarios are valid with our second rule. Our main target is the price hold inside the moving average zone. You need to have a basic knowledge of candlestick patterns to identify the high momentum candles. The main idea is to find a cross down with good momentum, so we can identify the momentum that just started and the market will continue in that direction.
The Buy Rules:
The buy rules are completely opposite of the sell rules. First of all, the price should cross above the green moving averages leaving a gap between the market price and the moving average. The second rule is the price should retrace inside the moving average zone. Our first target profit will be 1:1.5 and the second target profit will be 1:2. Do not set a profit target below 1:1.5 and above 1:2. Now, place stop loss above the lower moving average line or swing low of the retracement. Even though if the stop loss is too far away, do not enter the trade.
Testing the Strategy:
Now, we will test this strategy on the GBP USD currency pair. We will take 100 trades and calculate the accuracy and gain of this strategy. This was done using a 1:1 and 1:2 risks to reward ratio on GBP USD and it took one month of price data to find the 100 trade signals. There were 63 winners and 37 losses. The win rate is 63%, which is a really good win rate because our risk reward ratio is 1:1 and 1:2. The most one in a row was eight and the most lost in a row is three. The gain on the account was 82%, and that’s risking 2% per trade. If you had a $1000 account, you can gain at least $800 profit using only one currency pair.
Improving the Accuracy:
Now, we will add another indicator to our chart to filter fake signals. Go to the indicators tab and search for Bollinger plus RSI. Then, add the last indicator to the chart – RSI plus Backlight. By looking at the RSI Bollinger chart, we can easily understand whether the market is on an uptrend or a downtrend.
Conclusion:
In conclusion, the RSI crossover strategy is easy to understand and apply. You can find very profitable trades in a couple of hours. This strategy works very well on the lower time frames like five minute and fifteen minutes. However, we recommend you to do only three trades in the direction of a single trend and keep low the profit targets low in the second and third trades. Don’t risk more than 2% per trade, use more than one currency pair, and you can gain more money with this strategy.
