Build a Bollinger Bands and RSI Trading Strategy Using Python Mar, 2023 Medium

The price range between levels 30 and 0 is the oversold zone. The range between 70 and 100 is considered overbought RSI zone. Whether the Moving Average Convergence Divergence is better than RSI depends on your personal trading style. Try both and compare past performance and the current efficiency of your trading strategy.

One can also employ stocks Relative Strength Index in the stock market to spot separate securities for short-term investments. Nowadays, there are loads of indicators being created almost every week. You’ll notice that the bearish signals produced by RSI are not entirely “false” in every instance. In other words, these movements sometimes correspond with a temporary drop in price. But the bearish signal doesn’t reveal itself until the RSI drops below 70, at which point the window for profit is fleeting. If a forex trader chooses to invest against the trend and sell, they may benefit if they place a stop close to the entry point and exit with a profit before the uptrend continues.

• In other words, the lower RSI dipped, the higher the returns on subsequent long positions.
• But, this is possible with most trading platforms including TradingView and MetaTrader 4.
• It’s also important to note that the stochastic oscillator consists of two lines, while the RSI forms only one.
• Periods of consolidation are usually followed by massive breakouts, which makes any Bollinger Bands squeeze a vital time to watch the markets.
• RSI is used to confirm the signals generated by BBs.

The trades are entered according to the same principle. The oscillator turns up in the oversold territory or down in the overbought levels. The thin red ovals mark the reference points of the indicator coinciding with level 30.

Forex Laguerre indicator

One the other hand, the signals are more accurate in this case. Horizontal dotted lines are signal lines, whose parameters are specified in the settings. The values of 30 and 70 are by default; the levels scale is on the right of the RSI chart. Now it’s time to wait for another candlestick that will be lower than the 50th However, it’s important to have a look at the index.

Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity.

How to Trade with the RSI Trading Indicator

Typically, readings of 30 or lowerindicate oversold market conditions and an increase in the possibility of price strengthening . During a downtrend, the RSI tends to stay between the 20 to 60 range with the zone acting what is the forex grid trading strategy as a resistance zone. These levels can also be changed if necessary to better fit the security. For example, if security is repeatedly reaching the oversold level of 30 you may want to adjust this level to 20.

In theory, a market can be overbought for a long time, and also it can be oversold for a long time. There is no certainty that the market has reached its peak or bottom by simply looking at the RSI indicator while trading crypto. Momentum oscillators are a group of indicators that are used to give you an idea of how overbought or oversold a market is.

In this article, we will review a simple trading strategy using the RSI indicator. You are going to benefit from this strategy by learning to trade divergence. Find a low-risk way to sell near the top or buy near the bottom of a trend.

Add the RSI indicator and change the settings to 2 periods. We also recommend taking some time to learn about our mean reversion trading strategy. To place your stop, bump back 1 to 3 time periods and find a reasonable, logical level to put your stop. We come up with a trading strategy that focuses exclusively on the cryptocurrency market.

This technical instrument consists of a single line and two levels set by default. Vertical axis range of the indicator is set to 1 to 100 showing extremality of current price against its previous values. A Bollinger Band trading strategy can signal entry and exit positions based on band expansion or contraction as well as price action behaviour with respect to the bands. Signals given on a higher timeframe will be stronger than signals given on the lower timeframes. This shows you that the price change is the foundation of the RSI indicator. RSI in effect measures how strong were the up movements vs the down movements in the period in question.