ilmscore | Prediction Details
"here's the trade on the dollar canada we were just looking at as you can see we are still actually involved in this trade right now and i'm actually about to exit i want to go over why i'm deciding to exit this trade and then we'll do c e s t for this trade and the strategy that uses the rsi indicator with a faster setting in order to take advantage of trend continuation trades so first off why am i deciding to exit this trade now well it's because only 14 period rsi we have what we call rsi divergence and for those of you who are divergence traders the only reason i haven't talked about that yet is because these two strategies do not use it so don't worry i am going to get to that a little bit later on in the video including right now i like to use this for taking targets so whenever i see something like rsi divergence and selling pressure that's when i want to start looking at taking my position off so let me define rsi divergence really quickly it is very simple it is when the rsi indicator has a high and then a lower high while price has a high and then a higher high for rsi divergence when we're looking at overbought it would be the opposite for oversold scenarios but this being the case and seeing this massive amount of selling pressure with this big red candle including the fact that we're getting closer to 5 p.m and i don't want to hold this trade for another night means i'm going to go ahead and close this position so there we go we've exited the position now let's take the chart back using market replay and talk about the full rule set the cest for this trend continuation trading strategy so first off we have our rsi length set to seven the reason for this is because i want a faster moving rsi indicator to show me the most recent momentum of the market because i'm trading pullbacks based on that most recent momentum so with that being the case our first condition for this strategy is that i need a seven period rsi to go overbought at my swing high does that condition get met yes it does my second condition is that i must have a pullback into a major level of structure into the recent level of structure that price broke and if you want to add even more confluence to this you want to have this level be a level that has been tested multiple times so if those two factors are coming together that is going to be condition number one and two so we have condition number one and two met at the time of this long wicked candle right here with that being the case i have condition one and two met i now need to look for an entry my entry is buying pressure coming out of my level of structure and this trade had even more significance because that buying pressure was coming off of the 50 period moving average so so hopefully you're getting the point now that the rsi indicator by itself doesn't mean much but when we can add a lot of different confluence with it like candlestick patterns like levels of structure that have been tested multiple times like using it for trend continuation by shortening the length of the rsi like trading it only when we're in the correct trend when we're using the short period rsi which is something i forgot to mention in conditions for conditions we also need to be above the 50 period moving average so keep that in mind as well our entry candle long-wicked candle showing me buying pressure coming out of that level of structure and we've already seen the results of this trade but let's go ahead and talk about stops and targets before i click play stops and targets are quite simple for stop loss i just went below my entry candle because in this case your entry candle may or may not be the swing low so i always try to go below the swing low of this pullback that came from the rsi being above 70. for my targets i normally go with either previous structure or whenever i see rsi divergence you can pick however you would like to take targets for me it's more of a subjective term targets are very subjective for me that's why it's so hard for me to tell you some objective rules but initially i like to look for a 1.4 to 1 or structure levels in this case i let the market go a little bit further but that was the whole trade setup that was our reason for pressing the buy button was seeing our long-wicked candle come out of the structure level after all of those conditions were met and as you've already seen this trade ended up working out very well again i will say this this does not happen all the time this has losses it has a lot of losses just like any other strategy but over a long period of time it tends to make money for me in the way that i traded now let's take a look at a bearish example of this strategy on the pound yen now we're taking a look at the pound yen and we have another example here of the train continuation rsi strategy we're going to go ahead and place our order and we have a stop loss just above the swing high with a target that's going to be close to our next structure level let's see right about there in that area and with that being the case we're gonna go ahead and create the order we're gonna use a one percent risk on this trade and it needs to be a market order not a limit order and let's go ahead and sell all right so now we are in this position i'll keep you guys updated on how it plays out but for now let's go ahead and take a look at the rules for the bearish version of this strategy we ended up getting some really good movement out of the pound yen to the downside last night which ended up hitting our targets but now let's go through cest for the v for the bearish excuse me version of this strategy so conditions what do we need first off i didn't mention this on the bullish version but we need price to be in trend based on the 50 period moving average is priced below the 50 period moving average yes it is we then need to see the rsi 7 period go below 30 because that's showing us that at least in the short term we have momentum to the downside we can tell that this this is momentum though right you can tell by this waterfall of red candles we have momentum to the downside but as i said earlier this gives us a objective way of saying that so that we're never subjective with our strategies which is how to create roles based strategies condition one under the 50 period moving average condition two under 30 on the seven period moving average condition number three a pullback into the latest level of structure that was broken after those three conditions are met conditions times three we now are ready to start looking for our entry for our entry we want to see selling pressure at this area selling pressure is our entry so now we have conditions and entry again the stop loss above the swing high target down at previous structure and after hearing that twice hopefully it made this strategy extremely simple it really is not a very complicated strategy whatsoever and what we'll talk about again is a little bit of divergence so here just to explain divergence really quickly because i have not hit on it yet other than just now in the previous section of the video what we have for divergence in the oversold territory is a low that matches a low in price we then have a lower low in price and a higher low on the rsi indicator this is an extra confluence an added indication that we could see a reversal from this point if you ever want to add a little more confluence to an rsi being oversawed or oversold or overbought then be sure to look for divergence in the rsi indicator as i always say it is super important for you not to go and just randomly start trading this because i showed it to you as a strategy trading takes a lot of work if you want to lose weight or gain muscle you can't just go to the gym and watch everybody at the gym you have to actually put in work trading is the same way you're not gonna be able to watch a youtube video and then go be profitable so your next step is to back test these strategies if you're going to use them at least now you have an idea of how the rsi works and a couple of examples of how to create strategies with them obviously there's an unlimited amount of ways to use the rsi indicator these are just a couple of ways that i like to use it what i do want to go over right now though is a very simple way to do the back testing on this strategy it's a single time frame strategy so it's super easy to backtest this strategy you don't need an explanation take all the rules that are c-e-s-t look through historic data see how many times it won versus how many times it lost and if that comes up with a positive expectancy then you have what you need to take your next steps which we'll talk about later but a very easy way to test the multiple time frame strategy that we talked about is to go to your higher time frame and then get your 14 period rsi on the four hour chart which is the chart that we're using and all you have to do at this point is circle everywhere that went oversold or overbought on this four hour chart you don't have to actually circle the rsi i'm just showing you that price did go overbought in those areas so here we have everywhere that price went oversold or overbought and we're just going to circle every place that that happened once you have that done you can drop down to your one hour chart and you can look for double bottoms and head and shoulder patterns in those circles super simple way to back test that strategy so now you have no excuses for not back testing it this strategy is just as easy as the other one to back test whenever you take the steps of just circling every area on the larger time frame where price went overbought or oversold"
By The Trading Channel (The Trading Channel) | September 30, 2021 | Pending
From video
The Only RSI Indicator Trading Video You Will Ever Need... (Beginners Guide) 00:24:09 - 00:29:57
Interpreted Prediction
A bearish trend continuation strategy uses a 7-period RSI. Conditions are: price below the 50-period moving average, the 7-period RSI going below 30 (oversold), and a pullback to the latest level of structure that was broken. Entry is signaled by selling pressure (e.g., a convincing red candle) at this structure level. Stop loss is placed above the swing high, and targets are at previous structure levels. The strategy can also be enhanced by looking for RSI divergence in oversold territory.

Prediction Details

Topic
RSI Strategy - Trend Continuation (Bearish)

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