The Relative Arrows Strength forex trading strategy is a profitable trend following strategy which is made up of 2 free trading indicators.
These indicators come in the way of an oscillator (Relative Strength Index) and a custom trend indicator (ArrowsAndCurves), with both delivering a blend that sorts out market overbought and oversold conditions, alongside being able to define market trends respectively.
Let’s see how the whole strategy pans out.
Chart Setup
MetaTrader4 Indicators: Relative Strength Index.ex4 (Default Setting), ArrowsAndCurves.ex4 (Inputs Variable Modified; SSP=36, CountBars=225000)
Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day
Recommended Trading Sessions: Any
Currency Pairs: Any pair
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Buy Trade Example
Fig. 1.0
Strategy
Long Entry Rules
Enter a buy order if the following indicator or chart pattern gets put on display:
- If the blue upward pointing arrow of the ArrowsAndCurves custom indicator gets aligned below price bars as seen on Fig. 1.0, the overall market sentiment is said to be bullish, as such a trigger to go long on the selected currency pair is recommended.
- If the dodger blue line of the Relative Strength Index fall below the 30.00 level (oversold region) as shown on Fig. 1.0, price is said to be making a bullish reversal, as such a buy alert will suffice.
Stop Loss for Buy Entry: Place stop loss 2-5 pips below support.
Exit Strategy/Take Profit for Buy Entry
Exit or take profit if the following rules or conditions takes center stage:
- If a red downward pointing arrow of the ArrowsAndCurves custom indicator pops up slightly above the candlesticks, it is an alert of an imminent bearish reversal, hence an exit or take profit is advised.
- If the dodger blue line of the Relative Strength Index surges into the overbought region (above the 70.00 level) as depicted on Fig. 1.0, bulls power is said to be weaning, as such an exit or take profit will do.
Sell Entry Rules
Enter a sell order if the following holds true:
- If the red downward pointing arrow of the ArrowsAndCurves custom indicator gets placed above price bars as illustrated on Fig. 1.1, the general market sentiment is said to be bearish, as such a trigger to go short on the forex pair of interest.
- If the dodger blue line of the Relative Strength Index rises above the 70.00 level (overbought region) as depicted on Fig. 1.1, bulls power is said to be weaning, hence a sell trigger is looming.
Stop Loss for Sell Entry: Place stop loss 2-5 pips above resistance.
Exit Strategy/Take Profit for Sell Entry
Exit or take profit if the following takes center stage:
- If a blue upward pointing arrow of the ArrowsAndCurves custom indicator pops up somewhat below price bars, it is a trigger of a forthcoming bullish reversal, hence an exit or take profit is recommended.
- If the dodger blue line of the Relative Strength Index dips into the oversold region (below the 30.00 level) as seen on Fig. 1.1, bears power is said to be halting, as such an exit or take profit will do.
Note that there are cases when price moves our extreme zones (oversold/overbought), and continues to trend instead of making a price reversal. Those moments, we wait for the RSI to break out of the zone as a confirmation of trend exhaustion.
Sell Trade Example
Fig. 1.1
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About The Trading Indicators
The ArrowsAndCurves custom indicator combines two Moving Averages formed in a channel pattern with a blue or red arrow to deliver buy and sell alerts respectively.
Developed by J. Welles Wilder, the Relative Strength Index (RSI), is a momentum oscillator that gauges the speed and change of price movements.