Trading in a market require pre measured fixed rules and formulas which are base of strategy. Price moves in various directions according to market trend and there are ways to locate where a trend enters or ends in a market with the help of indicators.
RSI price rejection forex strategy:
Relative Strength Index (RSI)
Relative Strength Index mostly known as (RSI) work on a fix formula as scientific study based on rules. RSI is an indicator that measures the rate of change in price or its momentum. This indicator works as overbought and over sold within range of 0-100 series. RSI above the line 70 indicate over bought price and below the 30 line indicate oversold price.
In RSI both Price Rejection and Price Action are given but we focus on price rejections.
It is basically price movement on chat. And traders use many ways to read the price action.
It is a methodology to understand what market is doing and where price is going by analyzing group of candlesticks movement it is a best way to predict what market is thinking. This is only based characteristics of candlesticks. Price is rejected only when its recent price is far different from its past low and high level. Long tail and candles wick indicate a rejected price. If the price is below the candlestick tail and wick it is low rejected price. If the tail and wicks are above the candlesticks it high rejected price. Weather it is long wick or not both can be signal of price reversal.
Candlestick patterns: dark cloud, doji, engulfing pattern, piercing line, 3 soldiers, etc. knowledge about patterns is useful as a trader they can predict reversal in price
Enter and buy trade, exit and stop loss:
- At low price level below 30 indicating the oversold price.
- A clear upward trend of price rejection coming together with oversold RSI.
Setup for stop loss: place below the low lowest of upward price trend or reversed pattern will help to stop loss.
Take profit setup: it can be close at two time firstly when the trade reaches the RSI level 50 and second when the price reaches the RSI level 70.
Irregular loss stop: it should be done as soon as price uncertainty hit RSI level 50.
All these are signals to enter a buy trade in RSI oversold. At RSI level 50 stop loss but at the level of 70 traders can gain an attractive profit.
Enter and sell trade, exit and stop loss:
- RSI indicate the overbought at the price RSI level above 70
- A clear downward trend price rejection coming together with oversold RSI.
Setup for stop loss:place above the high highest of downward price trend or reversed pattern will help to stop loss.
Take profit setup: it can be close at two time firstly when the trade reaches the RSI level 50 and second when the price reaches the RSI level 30.
Irregular loss stop: it should be stop as soon as price uncertainty hit RSI level 50.
RSI Price Rejection Forex Strategy
Conclusion: this strategy does not predict price but RSI help to locate price when it reaches some over sold or bought levels.