RSI and Arrows Foreign exchange Buying and selling Technique

Trading strategies are usually divided into two types – medium reversal strategies and momentum strategies. These two types are technically opposite.

Medium reversal strategies assume that if the price is overstretched, the price will often reverse, meaning that it is either overbought or oversold. This is logically correct. If you thought about it, knowing the price range of a particular item and knowing that it is at an all-time high, you tend not to buy it. This behavior lowers the prices again. The opposite is true when the price is lower than ever. You would consider it a discount and buy it ASAP, which will increase prices.

Momentum Strategies, on the other hand, assumes that prices will often continue their current development. In many cases this also applies. If you are in urgent need of something new and you know that prices are going up, you would probably buy this product right away so as not to buy at a higher price. The same applies to the opposite side of the transaction. When sellers believe prices are going down, many tend to panic and start selling immediately so as not to lose more.

The above concepts also apply to trading. In fact, these behaviors drive the price movement that you see on your chart. The only difference is that when you trade, you will see a chart with candlesticks, bars or so on.

The RSI and Arrows Forex trading strategy is a type of strategy that uses both concepts, mean reversal and momentum. It combines these two opposing ideas and combines them into one strategy.

Relative Strength Index

The Relative Strength Index or RSI was first introduced by J. Welles Wilder in his 1978 book "New Concepts in Technical Trading".

RSI is an oscillating indicator that tries to reflect price movement in a separate window. It is a limited oscillating indicator that oscillates in the range of zero to 100. This allows traders to interpret the RSI as either a momentum indicator or a medium reversal indicator.

As a momentum indicator, traders typically look at the transition from level 50 to indicate the shift in momentum. Whenever the RSI line crosses 50, some traders take a trade towards the crossover.

As a medium reversal indicator, traders typically use 30 and 70 as an indication of likely reversal conditions. Whenever the RSI exceeds these levels, the price is considered oversold or overbought. Traders trading this method would expect a price reversal.

Arrow and curve display

Arrows and Curves is a custom indicator that is presented on the price chart itself. It consists of two outer ligaments. These bands could be interpreted as dynamic carriers and resistances.

This could mean different things to different traders. Mean Reversion traders would view these areas as points where price could bounce off. On the flip side, momentum traders would view a deal beyond these boundaries as a breakout, which could indicate a possible beginning of a trend move in the market.

This custom display also conveniently prints an arrow showing the direction of the trend when a pulse shift is detected.

Trading strategy

The RSI and Arrows Forex trading strategy is a trading strategy that combines both medium reverse and momentum strategies using two complementary indicators.

In this strategy, the mean reversal is observed using the RSI line. Whenever the RSI line falls below 30 or above 70, the market is considered either oversold or overbought. This should give us an indication that a possible reversal could occur.

However, we would only adopt the reverse trade setup if the momentum is confirmed. To do this, we use the arrows and curves indicator. We will wait for the price to move beyond the outer bands that we will consider breakouts. This should also be accompanied by arrows indicating the input signals.

Indicators::

  • Arrows and curves
  • Relative Strength Index

Time window: 1-hour, 4-hour and daily charts

Currency pairs: Major and minor pairs

Trading session: Meetings in Tokyo, London and New York

Buy Trade Setup

entry

  • The RSI line should drop below 30, indicating an oversold market condition
  • Let price reverse
  • Wait until the price is above the top of the arrow and curve display
  • When an up arrow prints through the Arrows and Curves display, place a purchase order

Stop loss

  • Set the stop loss to the support level below the entry candle

Take profit

  • Set the take profit target 2x the risk for the stop loss

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Sell ​​Trade Setup

entry

  • The RSI line should be above 70, indicating an overbought market
  • Let price reverse
  • Wait until the price is below the bottom of the arrow and curve display
  • Enter a sell order when a down arrow prints through the Arrows and Curves display

Stop loss

  • Set the stop loss to the resistance level above the entry candle

Take profit

  • Set the take profit target 2x the risk for the stop loss

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Conclusion

This trading strategy enables traders to take advantage of sudden momentum shifts. The momentum shifts should assume an overbought or oversold market condition. Then, when the price goes over the outer bands of the arrows and curve indicators, we take trading in the direction of the trading signal. This usually results in price moving in the direction of the trend with strong momentum.

Traders could use a different reward-to-risk ratio based on their risk appetite. Lower odds should allow for a better win rate, but a lower rate of return for winning trades.

Traders should also move the stop loss to break even as soon as possible if the trade is already making profits. However, it shouldn't be too early to hit the stop loss early.


Forex Trading Strategy Installation Instructions

RSI and Arrows forex trading strategy is a combination of Metatrader 4 (MT4) indicator (s) and template.

The essence of this forex strategy is to transform the accumulated history data and trading signals.

The RSI and Arrows Forex trading strategy provides the ability to see various specifics and patterns in price dynamics that are invisible to the naked eye.

Based on this information, traders can assume further price movements and adjust this strategy accordingly.

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Click here for the step-by-step XM Trading Account Opening Guide

How do I install the RSI and Arrows Forex trading strategy?

  • Download RSI and Arrows Forex Trading Strategy.zip
  • * Copy mq4 and ex4 files to your Metatrader Directory / Experts / Indicators /
  • Copy the tpl file (template) into your Metatrader directory / templates /
  • Start or restart your Metatrader client
  • Select the chart and timeframe in which you want to test your forex strategy
  • Right click on your trading chart and hover over “Template”.
  • Move right to select RSI and Arrows Forex Trading Strategy
  • You will see the RSI and Arrows Forex trading strategy is available on your chart

* Note: Not all forex strategies come with mq4 / ex4 files. Some templates are already built into the MT4 indicators of the MetaTrader platform.

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