Rsi bollinger strategy

Bollinger + RSI, Double Strategy (by ChartArt) by ChartArt — TradingView

 

rsi bollinger strategy

The 4 Hour RSI Bollinger Bands Forex Trading Strategy Buy/Sell Rules. There are many ways to use the Bollinger Bands but one of the most common and the most popular is to search for these periods of particularly low volatility which in technical terms it’s called the Bollinger squeeze. In the above AUDUSD M15 chart, price touched upper band of bollinger band and formed bearish candle, then rsi started falling from 70 level. It was perfect sell setup according to this strategy. On the buy setup, we can see price touched bollinger band first, but rsi didn't fulfills the conditions. After 2 candles, rsi confirms buy signal. For this strategy we will be examining the 4-hour and minute time frames of USD/SEK chart. The indicator we will be using is the Relative Strength Index (RSI) (with its period set to 14, overbought level – 70, oversold level – 30), while we will also apply the Bollinger Band (with its default settings).


RSI Scalping Forex Strategy with Bollinger Band


This is a fresh new series of technical analysis that I have not covered before. For many of the readers who have been following my blog for quite some time, you would have realised that all my posts under the technical analysis section are Ichimoku Cloud charts. While Ichimoku Cloud has its own strength and merits, they usually work best for trending markets or swing trading. The reason why I decided to do a post on the strategy of Bollinger Bands and RSI is that it allows us to know whether prices are high and overbought or low and oversold.

It is as simple as that, but obviously not as easy as the way I have said it. Before you make a buy or sell decision, you can plot on these 2 indicators to provide additional confirmation or disconfirmation. All it takes is 1 minute and you would have generated extra insights by using this strategy. But I do believe that one should be adaptable and versatile to the different tools, indicators and thinking in technical analysis.

There is no fixed system or fixed way of looking at charts. Things change and market changes. Sometimes you use this and other times you use that. This can help better time your entry or exit points. Leading indicator means it is designed to precede future price movements. It gives a signal before something happens. I found a good diagram from Babypips that pretty sums up everything about the leading indicator.

You can see that the leading indicator sort of gives an early warning signal before a trend rsi bollinger strategy occurs.

The downside of leading indicators is that they are less reliable and can sometimes lead to false signals. Remember that nothing is an absolute certainty in technical analysis. While the lagging indicator is more accurate, the bad news is you are probably late at the party when a lagging indicator shows up.

The Mechanics of Bollinger Bands Bollinger Bands is developed by John Bollinger in the s and it is commonly used to measure the volatility of an asset.

Here is how Bollinger Bands looks like on bitcoin. There are 3 components to Bollinger. The first one is just a simple day moving rsi bollinger strategy which is represented by the middle band. The second and third is the upper and lower bands that are two standard deviations away from the day SMA. It has much lesser components in comparison to Ichimoku.

What does it mean? It is really all there is to it. You can check out on Investopedia on how rsi bollinger strategy averages are calculated, rsi bollinger strategy. The upper and lower bands are slightly more complicated since it deals with the study of statistics. Standard deviation measures how far or near the data points are in comparison to the mean.

If the standard deviation is low, it means the prices are very close to the mean. If the standard deviation is high, it means prices are spread out far away from the mean. So what dos the upper and lower band signify? What does it mean to say that the upper and lower bands are 2 standard deviations above or below the mean?

To put this into context, the mean we are talking about in Bollinger Bands is the day simple moving average. The standard deviation is the past 20 data points. Imagine a data set of 20 prices, calculate the mean, calculate the difference between each price data with the mean, square it, sum it up and square root it.

That will give the standard deviation figure over the past rsi bollinger strategy days. The chances that the price would touch either the upper band or lower band is This can be seen from the above diagram. The chances that price would exceed the upper band or lower band is approximately 2. Usually, in such cases, rsi bollinger strategy, the price would rebound or retrace back sharply back within the upper and lower bands. That is the reason why you see the candlesticks are pretty much contained within the Bollinger Bands.

When the price moved BEYOND 2 standard deviations from rsi bollinger strategy mean, it is usually an extreme overbought or oversold position. The RSI oscillates between 0 towhere anything above 70 traditionally represents overbought and anything below 30 represents oversold. The formula for computing RSI is as follows. RS stands for Relative Strength. The formula of RS is slightly more tricky. The traditional setting rsi bollinger strategy RSI is to use a day period.

That is for the first 14 data points, rsi bollinger strategy. Any price that comes after the 14th data point would have a slightly different calculation.

In computing a simple moving average, the average price would continuously be the average of the past 14 days. The different aspect of RSI is that it takes a smoothed average that puts heavier weighting on the latest data. This is the precise reason why RSI is a leading indicator, rsi bollinger strategy. It is because the latest price has a significant influence on the value of RSI.

To illustrate, the day simple moving average on day 15 would be the average rsi bollinger strategy prices from day 2 to day To recap, the summary of how RSI is computed is shown below. After computing the value of RS, simply sub it into the formula and you would get an RSI value of anything between 0 to Based on the formula above, rsi bollinger strategy, it would only oscillate between 0 and If RS is higher, it means the smoothed average gain is higher than the average loss.

If RS is lower, it means the average loss is higher than the average gain. So if you see RSI creeping up higher and higher, that means the average gains to losses are getting higher and higher. Vice versa if RSI is sloping downhill, it simply means the average losses are getting higher and higher every day.

In Bollinger Bands, we mentioned that prices would always be contained within the upper and lower bands. In the case of Bollinger Bands, we are using the period moving average and period standard deviation.

The traditional way of using Bollinger is to trade for reversals. If a price hits the upper or lower band, it is likely to reverse as prices have already reached the extreme end. You can see from the below diagram that the price of gold sort of bounces between the upper and lower band.

Of course, things are not so simple in real life if not everyone else would be making money. In RSI, rsi bollinger strategy, we mentioned that it is an oscillator that oscillates between rsi bollinger strategy to Anything above 70 is considered overbought and anything below 30 is considered oversold. Similarly, RSI can be used as an indicator to give an early signal of a reversal. To illustrate, here is how it works. Remember that leading indicator provides an early warning signal before a trend reverses, rsi bollinger strategy.

You can see that when RSI hits the overbought region, after a couple of days the trend begin to reverse and slope downwards. Conversely, when RSI hits the oversold region, after a few days the trend begins to reverse and slope upwards. Again, things are not as simple in real life else everyone would be rich.

This would be a good entry price to buy. If you are looking to sell, you can wait for prices to hit the upper band and Rsi bollinger strategy hits the overbought region above The tricky part about this strategy is that prices can remain overbought or oversold for a long period of time.

From weeks to months. Similarly, prices can hover around the upper band or lower band for a long period of time. The price continues to increase along with the upper band and RSI continues to hover above There are times when prices continue to fall and stick along the lower band and RSI continues to stay below BUT, it does give you a good sense of where prices are at the moment.

The first confirmation is known as the RSI divergence. You can see that before the first big crash came, prices are making higher highs. It is making a lower high.

This is a bearish RSI divergence. This is an example of a bullish divergence. Prices are making a lower low. Prices rebounded and start moving upwards thereafter. You can actually learn more about regular and hidden divergence from babypips.

They have a pretty nice summary of the divergence cheat sheet. The rule of thumb in RSI divergence is that when drawing the lines connecting swing highs or swing lows, rsi bollinger strategy, it should be unobstructed. Secondly, rsi bollinger strategy, to prove that it is a swing high or swing low, the next candlestick should close above the previous price, rsi bollinger strategy.

The second confirmation is to look at the price action of the candlestick, rsi bollinger strategy. This means that we do away with all other indicators and just look at the patterns of the candlestick. I rsi bollinger strategy found a pretty good summary of the bullish and bearish candlestick patterns.

 

Bollinger + RSI, Double Strategy Long-Only (by ChartArt) v by ChartArt — TradingView

 

rsi bollinger strategy

 

The 4 Hour RSI Bollinger Bands Forex Trading Strategy Buy/Sell Rules. There are many ways to use the Bollinger Bands but one of the most common and the most popular is to search for these periods of particularly low volatility which in technical terms it’s called the Bollinger squeeze. Bollinger Bands + RSI, Double Strategy This strategy uses a slower RSI with period 16 to sell when the RSI increases over the value of 55 (or to buy when the value falls below 45), with the classic Bollinger Bands strategy to sell when the price is above the upper Bollinger Band and falls below it (and to buy when the price is below the lower band and rises above it). This strategy uses the RSI indicator together with the Bollinger Bands to go long when the price is below the lower Bollinger Band (and to close the long trade when this value is above the upper Bollinger band). This simple strategy only places a long, when both the RSI and the Bollinger Bands indicators are at the same time in a oversold condition.