Simple strategy with RSI and moving averages

In this article we are going to talk about a simple trading strategy based on the RSI oscillator and three moving averages (SMA and EMA). This strategy will also help us understand how the RSI, one of the most powerful technical indicators, works.

This is a relatively simple scalping strategy designed to operate in 5-minute time frames in the most liquid currency pairs (EUR/USD, USD/JPY and GBP/USD).

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Stochastic RSI Indicator

The Stochastic RSI was developed to increase the sensitivity and reliability of the regular RSI indicator especially when the trader wants to trade  during periods when the RSI is in overbought/oversold condition.
The creators of this indicator – Tushar Chande and Stanley Kroll – explain that very often the RSI oscillator remains at the levels 20 and 80 for extended periods of time without even reaching the overbought and oversold areas where many traders look for opportunities to enter the market.
Therefore, when the RSI is combined with the stochastic oscillator, a new indicator, the Stochastic RSI, offers better and clearer signals for opening and closing positions.

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