The support and resistance levels are widely used among traders to determine the points of the trend reversal. However, they are not saying much about the direction of this reversal. And this is why it is a very good idea to use some other indicators along the way. This guide’s purpose is to show you how to trade using the support/resistance lines and the Relative Strength Index (RSI).
- 1 How to configure the RSI on the Olymp Trade interface
- 2 How to set the support and resistance levels on the Olymp Trade platform
- 3 Perfect for long-term trades
- 4 Using a combination of the RSI and the support/resistance levels in trading on the Olymp Trade platform
How to configure the RSI on the Olymp Trade interface
Once you are logged into the Olymp Trade account, find graphical tools feature and click on it. A new window with indicators list will appear. Scroll down until you will reach “Oscillators” and select RSI. The Relative Strength Index is now set up.
How to set the support and resistance levels on the Olymp Trade platform
You will need to draw the support and resistance lines yourself because the predetermined indicator like this does not exist. But it is not a difficult task. You start by clicking a graphical tools’ icon. You scroll down until you will find “Drawing”. Now you have two options. First one is to draw a line with “Horizontal line”. You just need to place the line you will see on the chart, in the right place that is on the level where it connects at least two lows for the support line or two highs for the resistance line. The second option is to draw the support and resistance levels with “Trend line”. In this case, you need to determine the beginning and the ending of the line.
Perfect for long-term trades
As was mentioned before, the RSI is the Relative Strength Index and it represents the relative strength of a particular asset. Its value is indicating the strength in the number of candles defined as a period. For instance, 14 RSI stands for the relative strength of 14 successive candlesticks.
One other notion worth to know about RSI is its divergence. This is basically a valuation of an asset’s price versus its relative strength index. As the price increases, the index decreases. When the price falls, the index is rising. And this announces the upcoming reversal of the trend.
The support and resistance levels are helpful in identifying the point, which the price is likely to achieve prior to the reversal of the trend. Use them together with the RSI and you will get a pretty clear picture of a forthcoming trend reversal.
Using a combination of the RSI and the support/resistance levels in trading on the Olymp Trade platform
Prepare your chart, choose the asset and candles’ timeframe. I will trade EURUSD currency pair with 5-minute candles. I think this is the best option because they give a pretty good picture of what is happening on the market. The smaller period like 1 minute is more difficult to read. Especially that the trades we intend to open will last 15-30 minutes.
After you do the above, configure the RSI.
Next, analyse the chart and determine the level of support/resistance.
Trading 15-30 minutes long positions at Olymp Trade
Look at the chart beneath. I determined the support level and drew a line with the help of “Trend line”. At some point, there is a pinbar formed on the support level. At the same time, the RSI is rising. The uptrend is inevitable. When the pinbar is fully developed I enter 15 or 30 minutes long position.
The most important thing here was to identify the support line correctly. It takes some time to become an expert in the support/resistance lines, but it pays off. Setting 5-minute candles is of great help because it gives an overview image.
Trading 15-30 minutes short positions at Olymp Trade
This time I drew the resistance line. At the moment the price touched it again, the RSI indicator was falling, resulting in a divergence. On the basis of these signals, I open 15 or 30 minutes lasting short position.
Your focus, while trading the RSI combined with the support/resistance, is not on the price touching the levels. It should be directed to the RSI line. If you see it is dropping, you can be pretty sure the downtrend is coming. When the RSI is rising, you can expect the uptrend.
Maybe you find this method somewhat challenging, maybe you are afraid to lose money. Do not worry, because there is a free demo account on the Olymp Trade platform. There you can practise new strategies without the risk of money loss. Use the comments section below to share your doubts, thoughts and successes.
Have an enjoyable experience!
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