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If you already know something about the financial market, you understand that to make a successful trade you need to predict the direction the price is going to move in. The most reliable results can be obtained by using a simple but very effective strategy, based on the RSI indicator.
You may not be familiar with technical indicators. These are the colored lines that are depicted on the price chart. They are built according to a special mathematical algorithm. These lines take into account all values the price has taken in the past. They also can help you to predict where the price will go in the nearest future. These lines are quite simple to analyze. You can find this instrument in the technical analysis window on the OLYMP TRADE platform.
Setting a Strategy
To make our strategy work correctly, you’ll need to configure the indicator RSI (Relative Strength Index). It will show you when the financial instrument is either overbought (the price is going to drop and it’s time to press “DOWN”), or oversold (the price is going to rise and it’s time to press “UP”). Thus, you will be able to see when the current trend is ending and a new one begins.
So:
Open the Technical Analysis window, and reach the Indicator Panel from the Top Menu. Select the Relative Strength Index.
In the new window use the following settings:
Length = 14
Source – Close
After that, the RSI indicator (the green line) will appear under the main chart. It will be ranged between 0 and 100.
Look at the picture: if the RSI is 70 or higher, it means the market is overbought; and if it is less than 30, the market is oversold.
Receiving signals
If RSI is more than 70, the uptrend is ending.
As soon as the line begins to descend, you can trade “DOWN”.
Trading time – 10 minutes.
If the RSI is less than 30, the downtrend is ending.
As soon as the line begins to rise, you can trade “UP”.
Trading time – 10 minutes.
As you can see on the chart, signals appear quite often. There may be about twenty of them within one day.
OLYMP TRADE Recommendations
This strategy works with any financial instruments such as currency pairs, metals, and oil. It is best to trade when the European session is active (from 09:00 to 11:00, Moscow time) or during the American session (from 15:00 to 21:00, Moscow time). Moreover, the method can be applied when the important news is released.
However, the Pacific and Asian sessions (from 20:00 to 08:00, Moscow time) are not the best for using this strategy.
It will not be long before you learn how to use the chart and notice good opportunities for trading.
Good luck!