We gave the name to this strategy just like that, based on the principle “Why reinvent the wheel.” And really, why invent something new if you can adapt something that has been working for more than a year?
Yes, there is a theory according to which technical indicators lose relevance over time for several reasons:
- efficiency decreases due to the fact that indicators are used by many traders, thus provoking a change in the logic of the market;
- predictability becomes a tool in the hands of market makers who understand the logic of the majority and use it for their own purposes;
- market approaches and influencing factors change, and along with them, the formulas of indicators calculated for other historical stages also become obsolete.
Part of the logic is there. Classic trading is predictable, and can not everyone earn on one strategy? And the goals with priorities are somewhat different, the market is improving. However, you can talk about it for a long time. We offer a classic strategy with RSI indicators (a modified version of the indicator here) and Bollinger Bands, which is quite working, although the indicators are known to all.
Classic Trading with RSI and Bollinger Bands
The Bollinger Bands are a channel indicator, which is convenient because with properly selected parameters, it shows the price deviation corridor, and the relative strength index helps it in this. However, even in classic trading, we brought something original: a simple sliding indicator was attached to RSI, which is an index with one combined indicator.
- You can get the template of this indicator for free by writing about it in the comments after the article. Leave your email address and get it as soon as possible.
Long-term strategy, recommended timeframe – H1 (1 hour). Currency pairs are classics of the genre. The strategy works quite well on the most popular euro / dollar pair. US and British pounds / dollars. United States.
- RSI period and MA averaging period – 9.
- BB period – 20, shift – 0, deviation – 2.
Long position opening condition:
- RSI refers to level 20 or passes through it from the bottom up.
- The RSI intersects the gliding upwards, provided that both lines are in the range of 20-30 levels (above 20, but below 30).
- At one of the last 3 candles, the price reached the lower limit of the explosive or lowered below it.
The strategy is reminiscent of classic stochastic trading. Touching the price border of the Bollinger Bands means the likelihood of a return to the channel, and the RSI notes overbought and oversold levels. On the next candlestick after the conditions coincide, we open a deal.
Exit from the market under one of the following conditions:
- price intersection of the BB middle line;
- price touching the top line of the BB.
The condition for opening a short position:
- RSI is level 80 or down through it.
- The RSI crosses the gliding top-down, provided that both lines are in the range of 80-70 levels (below 80, but above 70).
- At one of the last 3 candles, the price reached the upper limit of the explosives or rose above it.
Closing a position is similar. A signal to the early closing of the transaction may be the fact that the price moved away from the entry point to the market, but did not reach the middle line of the explosives and turned to the opposite border from the target channel. Trades are few, so you can test classic trading on several currency pairs. Download indicator templates, install, test strategy and share impressions in the comments!