ETHUSD 1H RSI 80-20 TRADING STRATEGY
Updated
Step One: Find the currency pair that is showing a high the last 50 candlesticks. (OR low depending on the trade)
The 80-20 Trading strategy can be used for any period or any market.
This is because there are reversals of trends in every period. This can be a swing trade, day trade, or a scalping trade. As long as it follows the rules, it is a valid trade. We also have training for building a foundation before a forex strategy matters.
In this step, we only need to ensure it is the low or the high of the last 50 candles.
Step Two Using the RSI Trading Indicator: RSI Settings - Period 8 - Levels 80/20
When we find 50 candle low, it needs to be coupled with RSI reading 20 or lower. (If it’s high it needs to be combined with the RSI reading 80 or higher.)
Once we see that we had a low, the last 50 candles, and the RSI is BELOW 20, we can move to the next step.
Remember that this strategy is a reversal strategy. It is going to break the current trend and move the other direction.
Step Three: Wait for a second price (low candle) to close after the first one that we already identified.
The second price low must be below the first low. Although the RSI Trading indicator must provide a higher signal than the first. Remember that divergence can be seen by comparing price action and the movement of an indicator.
If the price is making higher highs, the oscillator should also be making higher highs. If the price is making lower lows, the oscillator should also be making lower lows.
If they are not, that means price and the oscillator are diverging from each other.
Which is why it’s called “divergence.”
Just because you see a divergence, doesn’t mean you should automatically jump in with a position.
We have rules in place that will capitalize on this divergence so that we can make a significant profit.
Keep in mind, that this step may take time to develop. It is very important to wait for this second low because it gets you in a better trade making position.
Price goes down/RSI goes up. That is the Divergence.
Remember that our example is a current downtrend looking to break to the upside. If this was a 50 candle high, we would be looking at the exact opposite of this step.
Step Four: How to Enter the Trade with the RSI Trading Strategy.
The way you enter a trade is very simple.
You wait for the price to head in the direction of the trade and wait for a candle to close above the first candle that you identified that was previously 50 candle low.
Step five: Once you make your entry, place a stop loss.
To place your stop, bump back 1 to 3 time periods and find a reasonable, logical level to put your stop. You are looking for prior resistance, support.
Step 6: I recommend you follow at least a 1 to 3 profit vs. risk level. This will ensure that you are maximizing your potential to get the most out of the strategy. You can adjust as you wish. Keep in mind that most successful strategies that identify breaks of a trend use a 1 to 3 profit vs. risk level.
The 80-20 Trading strategy can be used for any period or any market.
This is because there are reversals of trends in every period. This can be a swing trade, day trade, or a scalping trade. As long as it follows the rules, it is a valid trade. We also have training for building a foundation before a forex strategy matters.
In this step, we only need to ensure it is the low or the high of the last 50 candles.
Step Two Using the RSI Trading Indicator: RSI Settings - Period 8 - Levels 80/20
When we find 50 candle low, it needs to be coupled with RSI reading 20 or lower. (If it’s high it needs to be combined with the RSI reading 80 or higher.)
Once we see that we had a low, the last 50 candles, and the RSI is BELOW 20, we can move to the next step.
Remember that this strategy is a reversal strategy. It is going to break the current trend and move the other direction.
Step Three: Wait for a second price (low candle) to close after the first one that we already identified.
The second price low must be below the first low. Although the RSI Trading indicator must provide a higher signal than the first. Remember that divergence can be seen by comparing price action and the movement of an indicator.
If the price is making higher highs, the oscillator should also be making higher highs. If the price is making lower lows, the oscillator should also be making lower lows.
If they are not, that means price and the oscillator are diverging from each other.
Which is why it’s called “divergence.”
Just because you see a divergence, doesn’t mean you should automatically jump in with a position.
We have rules in place that will capitalize on this divergence so that we can make a significant profit.
Keep in mind, that this step may take time to develop. It is very important to wait for this second low because it gets you in a better trade making position.
Price goes down/RSI goes up. That is the Divergence.
Remember that our example is a current downtrend looking to break to the upside. If this was a 50 candle high, we would be looking at the exact opposite of this step.
Step Four: How to Enter the Trade with the RSI Trading Strategy.
The way you enter a trade is very simple.
You wait for the price to head in the direction of the trade and wait for a candle to close above the first candle that you identified that was previously 50 candle low.
Step five: Once you make your entry, place a stop loss.
To place your stop, bump back 1 to 3 time periods and find a reasonable, logical level to put your stop. You are looking for prior resistance, support.
Step 6: I recommend you follow at least a 1 to 3 profit vs. risk level. This will ensure that you are maximizing your potential to get the most out of the strategy. You can adjust as you wish. Keep in mind that most successful strategies that identify breaks of a trend use a 1 to 3 profit vs. risk level.
Note
Bitcoin Signal Indicator found bullish reversal tradeNote
I canceled the RSI 80/20 trade because a new lower low was made. A reversal is probably happening because the timing of it is better but a different reversal strategy needs to be applied.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.