Strategy: Fibonacci + RSI
The RSI is without a doubt the most famous momentum indicator out there, and this is to be expected as it has many strengths especially in ranging markets. It is also bounded between 0 and 100 which makes it easier to interpret. The RSI is calculated using a rather simple way. We first start by taking price differences of one period. This means that we have to subtract every closing price from the one before it. Then, we will calculate the smoothed average of the positive differences and divide it by the smoothed average of the negative differences.
-The Fibonacci sequence follows this distinct pattern: 0,1,1,2,3,5,8,13,21,34,55….
The numbers are found by adding the previous two numbers behind them. In the case of 13, it is calculated as 8 + 5
The concept of combinine the Relative Strength Index and the Fibonacci sequence is quite simple and can be summed in the following way:
We start by taking the 1-period differences of the highs and put the result in a new column.
We also proceed by taking the 1-period differences of the lows and put the result in a new column after the first column.
Average the two previous columns in a new column, giving us the average High-Low differences. This is done in order to take volatility into account.
Create two new columns where the first one is populated by the positive values from the previous columns and the second one is populated by the absolute values of the previous column. Therefore, we will have two new columns containing positive values and zeros from time to time. Note that the columns should not overlap.
Apply the Fibonacci Moving Average function on both columns. We will set the range of Fibonacci as an interval. For example an interval of three means that we will use the lookback periods {3, 5, 8} An interval of 6 covers the lookback periods {3, 5, 8, 13, 21, 34}. We will use an interval of 9.
Apply the Relative Strength function to find the Fibonacci Relative Strength Index.
Time Frames Tested with best Results:
30 Minutes.
5 Minutes.
15 Minutes.
1 Minute
Indicators Used:
RSI (30 / 70)
Fibonacci (1 - 0.784)
How it Works:
Once the Price Hits the 1 or -1 Fibonacci Level and bounces a little bit, It checks the RSI if Over Bought or Over Sold According to 30 - 70.
If both conditions are satisfied, it triggers a Long or Short Positions.
-Let us try generating the signal charts to get an idea on their quality. The conditions are as expected:
Go long (Buy) whenever the market reaches or breaches the lower barrier at 15 with the previous two values being above 15.
Go short (Sell) whenever the market reaches or breaches the upper barrier at 85 with the previous two values being below 85.
-The Fibonacci sequence follows this distinct pattern: 0,1,1,2,3,5,8,13,21,34,55….
The numbers are found by adding the previous two numbers behind them. In the case of 13, it is calculated as 8 + 5
The concept of combinine the Relative Strength Index and the Fibonacci sequence is quite simple and can be summed in the following way:
We start by taking the 1-period differences of the highs and put the result in a new column.
We also proceed by taking the 1-period differences of the lows and put the result in a new column after the first column.
Average the two previous columns in a new column, giving us the average High-Low differences. This is done in order to take volatility into account.
Create two new columns where the first one is populated by the positive values from the previous columns and the second one is populated by the absolute values of the previous column. Therefore, we will have two new columns containing positive values and zeros from time to time. Note that the columns should not overlap.
Apply the Fibonacci Moving Average function on both columns. We will set the range of Fibonacci as an interval. For example an interval of three means that we will use the lookback periods {3, 5, 8} An interval of 6 covers the lookback periods {3, 5, 8, 13, 21, 34}. We will use an interval of 9.
Apply the Relative Strength function to find the Fibonacci Relative Strength Index.
Time Frames Tested with best Results:
30 Minutes.
5 Minutes.
15 Minutes.
1 Minute
Indicators Used:
RSI (30 / 70)
Fibonacci (1 - 0.784)
How it Works:
Once the Price Hits the 1 or -1 Fibonacci Level and bounces a little bit, It checks the RSI if Over Bought or Over Sold According to 30 - 70.
If both conditions are satisfied, it triggers a Long or Short Positions.
-Let us try generating the signal charts to get an idea on their quality. The conditions are as expected:
Go long (Buy) whenever the market reaches or breaches the lower barrier at 15 with the previous two values being above 15.
Go short (Sell) whenever the market reaches or breaches the upper barrier at 85 with the previous two values being below 85.
Disclaimer
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