Traders use various strategies to find the best moments to open and close their positions. The decision of which one to choose is individual. You have to consider your skills and preferences. But it is always good to learn about different methods so you know your options. Today we are going to talk about trading Fixed Time Trades with Relative Strength Law. This strategy is available on the Olymp Trade platform for free. It can be selected from the strategies by clicking the Technical Analysis icon. Alternatively, the RSI indicator can simply be inserted into the chart and the period set to 5.
How to trade FTT with Relative Strength Law strategy
The strategy we are describing today is based on the Relative Strength Index. So log in to your Olymp Trade account, decide what financial instrument you are going to trade during this session. Set the type of the chart and candlesticks period at 5 minutes. Then, click on the indicators icon and find the Relative Strength Index. This indicator appears below the price chart in the separate window in the form of a line moving between values 0 and 100. The middle line is 50 and the lines 30 and 70 indicate oversold and overbought areas.
For the needs of today’s strategy, the period of the RSI should be set at 5. The period of the candlesticks, as I have mentioned before, at 5 minutes. And the duration of the trades will be 10 minutes. If you want, you can use this strategy on higher chart time intervals as well. The principle here is simple. The duration of the trade should be twice the duration of a single candle in the chart.
Opening long trades
To even consider opening a long position, the RSI must indicate an oversold market. The line of the indicator should be below the level of 30. If this is the case, it is worth preparing everything for opening a transaction, i.e. setting the amount and trade duration. Then we wait until the close of the candle and check if the RSI has crossed upwards at level 30. If so, we immediately open a position for an increase in price at the opening of the next candle.
We have used the example of the GBPUSD currency pair. The trade closed after 10 minutes bringing an $82 profit.
Opening short transactions
To identify the possibility of opening a short position, the RSI must indicate an overbought market. The line of the indicator should be above level 70. If this is the case it is a good idea to prepare everything for the trade, i.e. set the amount and trade duration. As a reminder: the trade length should be twice the chart interval. Then wait until the close of the candle and check if the RSI has crossed below level 70. If so, immediately open a position for a price decline at the opening of the next candle.
The expiration time was set at 10 minutes. In our example for the EURCHF currency pair, the result of the trade is $80 in profit.
Pros and Cons of Trading FTT with Relative Strength Law Strategy 📊
- Effective for short-term price movements. 📈
- Uses the Relative Strength Index (RSI) as a reliable indicator. 💪
- Allows traders to identify oversold and overbought market conditions. 🎯
- Requires careful monitoring of the RSI indicator and candlestick patterns. 🧐
- Short-term nature of the strategy may result in higher trading frequency. ⏱️
- Additional conditions, such as trend filters, may be needed for better accuracy. 🔄
Trading Fixed Time Trades with Relative Strength Law Strategy: Step-by-Step Guide 📈
|Log in to your Olymp Trade account and select the financial instrument you wish to trade.
|Choose a 5-minute chart and set the candlestick period to 5 minutes.
|Click on the indicators icon and select the Relative Strength Index (RSI).
|Set the RSI period to 5 and observe the indicator’s line below the price chart.
|Look for oversold market conditions when the RSI line is below 30.
|Wait for the candle to close and ensure the RSI crosses above 30.
|Open a long position for an increase in price at the opening of the next candle.
|Monitor the trade until the expiration time, typically set at 10 minutes.
|Repeat the process for identifying overbought market conditions and opening short positions.
The main rule is to use the moment of the reversal of the trend and enter on the base of the signals given by the Relative Strength Index oscillator.
The strategy was developed for use in Fixed Time Trades. The strategy combines two simple elements. The first is the short term RSI which allows the strategy to catch short term price movements. The second element is that the trade itself is also time-limited. If the market is observed on a 5-minute chart, the length of the trade should be 10 minutes.
Using the strategy is relatively easy. However, it is worth taking some time to test it on a demo account. In addition, you may want to consider applying additional conditions that can help make the strategy more effective. Such an additional condition for the Relative Strength Law strategy could be the use of the long term average as a trend filter.
We wish you success in the market!
Frequently Asked Questions (FAQs) about Trading FTT with Relative Strength Law Strategy ❓
- Q: What is the Relative Strength Law strategy?
A: The Relative Strength Law strategy is a trading approach that utilizes the Relative Strength Index (RSI) to identify short-term price movements in Fixed Time Trades (FTT).
- Q: How does the RSI indicator help in this strategy?
A: The RSI indicator helps identify oversold and overbought market conditions, indicating potential trend reversals and entry points for trades.
- Q: What is the recommended RSI period for this strategy?
A: The recommended RSI period for this strategy is 5, as it focuses on short-term price movements.
- Q: Are there any additional conditions that can enhance the strategy?
A: Yes, additional conditions such as using a long-term average as a trend filter can improve the effectiveness of the strategy.
- Q: Should I test this strategy on a demo account before trading with real money?
A: Yes, it is always recommended to test any strategy on a demo account to familiarize yourself with its mechanics and assess its performance before risking real money.
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