Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
TRADING PLAN
The RSI (relative strength index) i love so much and have a different way of interpreting and using it. I will be explaining how to take advantage of pressure on the RSI extreme levels of 70 and 30.
Indicators: RSI 14 period, Bollinger 20, Default Stochastic on Daily timeframe only.
Time frames: 1hr and 15min
Trading Style: Intra-day
Looking at the chart bellow.
Each time the bollinger band touches the bands, i expect the RSI to touch the extreme points too. If not then, I want to believe price should bouch back from this point. For example, If bollinger band touchies and especially closes above the upper band, and RSI is not touching the 70 level, then i expect a SHORT.
To make an entry I simply go to the 15min timeframe and wait for a trendline break like the popular perter bain would do. Check the chart bellow.
NOTE: Dont ever trade agains the Daily Default Stochastic 5,3,3 - check the chart below to confirm our short trade explained above
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