Are you ready to take your trading skills to the next level? Today, we will explore a unique and effective trading strategy combining the power of two RSI indicators with a 50-period smoothed moving average (MA).
Following the Double RSI Crossover 4-Hour Trading Strategy will give you valuable insights into both short-term and long-term momentum, allowing you to make smarter trading decisions. So, let’s dive in and discover the secrets of this advanced trading technique!
The Double RSI Crossover System
The RSI Nexus System, or – Double RSI Crossover system – combines two RSI indicators on a single graph, providing a comprehensive view of the market. The first RSI is a short-term indicator with a period of 14, depicted by the blue line. The second RSI is a long-term indicator with a period of 35, shown as the orange line. These two lines form a crossover signal that guides our trading decisions.
50-period smoothed MA with forward shift 12.
- This smoothed moving average shows us the main trend in the market. When the price is above the MA, the main trend is bullish, and we only look for potential long trades. Conversely, the trend is bearish when the price is below the 50-period smoothed MA, and we only consider short trades.
Two RSI indicators:
- One short-term RSI with standard period 14 (blue line)
- The other, a long-term RSI with period 35 (orange line)
Note: by default, the RSI is calculated based on the close. For this strategy, we use the typical price (HLC/3). You can change this setting in MT4.
Tip: To plot the two RSIs into one graph in MT4, just drag the second RSI from the navigation panel and drop it over the already plotted RSI. The second RSI will now show on top of the first one.
The settings of the RSI Nexus system tend to work the best for swing trading, so timeframes like the 4H are most suitable. However, it can also work well on other timeframes and asset classes, so you are free to use and test it.
First Things First: Determining the Main Trend
Before entering a trade, it’s essential to identify the main trend. We use a 50-period smoothed moving average (MA) with a forward shift of 12 to accomplish this. When the price is above the MA, it indicates a bullish trend, and we focus on potential long trades. Conversely, when the price is below the MA, it signifies a bearish trend, and we consider only short trades.
Once we’ve established the main trend, we look for crossovers of the RSI indicators in the same direction as the trend.
For bullish trades, the short-term RSI should cross above the long-term RSI, while for bearish trades, the short-term RSI should cross below the long-term RSI. Additionally, as a confirmation, the long-term RSI (orange line) should be above 50 for bullish trades and below 50 for bearish trades. This combination of crossovers and RSI confirmation ensures a stronger entry signal.
Placing Stop Loss Orders and Exiting Trades
Protecting our capital is crucial in any trading strategy. Therefore, we place the stop loss behind the 50-period smoothed moving average to manage risk.
We exit a trade when the RSI indicators cross back in the opposite direction, indicating a potential trend reversal. Moreover, if the long-term RSI reaches overbought or oversold conditions, it can be considered a valid exit signal.
Unlocking the Advantages of the Double RSI Crossover (RSI Nexus System)
Congratulations! You’ve now uncovered the power of the RSI Nexus – Double RSI Crossover 4-Hour Trading Strategy. Remember to thoroughly test this strategy on different timeframes and asset classes to determine its effectiveness for your trading style.
The strength of the Double RSI Crossover strategy lies in its ability to provide a comprehensive picture of the market. The RSI itself is a valuable tool, highlighting the strength of trends and potential overbought or oversold conditions. We gain insights into both short-term and long-term momentum with the Double RSI – combining two RSI indicators. Basically, you can easily elevate your trading game armed with a more advanced indicator.
By combining the main trend, RSI crossovers, confirmation signals, and strategic stop loss and exit rules, you’ll be equipped to make smarter trading decisions and potentially increase your profitability. So start implementing this advanced strategy today and take your trading to new heights!
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