Olymp Trade provides plenty of indicators that will help you to identify the best entry points. Sometimes it might be a good idea to combine a few. On the other hand, do not set too many indicators on one chart as it will be too difficult to read such a chart.
One good combination is to use the relative strength index together with the support/resistance levels. If you wish to read more about this method, please check our guide about combining RSI with S/R levels. Here, I will show you the beautiful example of trading with the RSI and the support/resistance.
The trading is based on the signals from the support/resistance levels and the RSI indicator. What is most important for every trader is when exactly open the position. Then comes the questions about the direction and the duration.
You need to look for the moment where the price reaches the support/resistance and there is the RSI divergence at the same time. With experience, you will recognize such a situation faster. If you are a beginner, it could be a good idea to read about reversal candles.
The beautiful entry points at Olymp Trade on November 1st
Our beautiful example comes from the morning of November 1st. The EURUSD currency pair was the financial instrument and the chart was set for 5-minute interval candles. The RSI is configured and the support and resistance lines are drawn accordingly. There were 2 nice entry points during that morning. Let’s take a closer look at them.
Trade number 1. Price at the resistance level and the RSI drops – go short.
A few minutes after 09:00 in the morning, the price breaks the resistance level. A pinbar has formed and right after a bearish candle appears within the previous resistance level. Now, what happens to the RSI? It is definitely falling from nearly 70 towards 50. What is important here is that the peak on RSI is lower than the previous one. All the signals suggest an opening down position for a long duration.
Trade number 2. Price at the support level and the RSI rises – go long.
The price enters the support level. You can notice a bullish engulfing candlestick pattern here. At the same time, the RSI oscillator is rising from 30 towards 50. This is a moment to enter a long-lasting buy trade.
Pros and Cons of Trading with Olymp Trade
- Wide variety of indicators to identify optimal entry points.
- Provides educational resources for beginners.
- Supports different timeframes for trading strategies.
- Offers user-friendly platform.
- Can be challenging for beginners to read charts with multiple indicators.
- Trading during news releases can be risky.
- Requires patience and practice to master trading strategies.
Comparison: RSI with Support/Resistance vs. Other Trading Strategies
|RSI with Support/Resistance
|Combines RSI and support/resistance levels for optimal entry points; requires patience and practice to master.
|Uses simple or exponential moving averages to identify trends and potential reversals; widely used by traders of various experience levels.
|Incorporates Fibonacci ratios to identify potential support and resistance levels; requires understanding of technical analysis.
|Utilizes upper and lower bands around a moving average to measure market volatility and identify overbought or oversold conditions.
A final word about trading S/R levels with the RSI
The above exemplary chart was set for 5-minute candles. With such a chart you should open positions that last a long time, 15 minutes or more. Entering the trade for too short could result in losing as the price tends to retest the support/resistance before following the expected trend.
That trading in November was conducted during morning hours. Be careful while trading the EURUSD currency pair in the evening. This particular asset is very sensitive to news releases. And often the news is published late in the day in Europe and America. Indicators may not work as expected during this time.
Trading requires a lot of patience. You should not hurry. Analyze the chart and wait until the price reaches the support or resistance level. Then observe the indicator. Enter the position when all the signals are clear. It is not difficult to lose money, and you will most likely do so. Make sure it does not happen too often. Be patient.
All the best!
Frequently Asked Questions
- Q: How do I set up the RSI indicator on Olymp Trade?
- A: To set up the RSI indicator, open the Olymp Trade platform and select the asset you want to trade. Click on the “Indicators” icon and choose the “Relative Strength Index (RSI)” option from the list. Adjust the settings if needed, then click “Apply.”
- Q: What are the best timeframes to use with the RSI and support/resistance strategy?
- A: The strategy can be applied to various timeframes, but using a 5-minute chart with a longer trade duration (15 minutes or more) can be effective.
- Q: Can I use the RSI and support/resistance strategy on other assets besides the EURUSD currency pair?
- A: Yes, the RSI and support/resistance strategy can be applied to various assets, including other currency pairs, stocks, commodities, and cryptocurrencies.
- Q: How can I improve my trading skills with Olymp Trade?
- A: To improve your trading skills, take advantage of Olymp Trade’s educational resources, practice on a demo account, and be patient while developing and refining your trading strategies.
- Q: How do I identify the support and resistance levels on a chart?
- A: Support and resistance levels can be identified by looking for areas where the price has repeatedly bounced off or reversed direction. These levels can be drawn as horizontal lines on the chart to help visualize potential entry points.
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