RSI Trading Strategy | Best RSI Setting for Day Trading (2024)

FAQs

RSI Trading Strategy | Best RSI Setting for Day Trading? ›

Short-term intraday traders (day trading) often use lower settings with periods in the range of 9-11. Medium-term swing traders frequently use the default period setting of 14. Longer-term position traders often set it at a higher period, in the range of 20-30.

The common levels to pay attention to when trading with the RSI are 70 and 30. An RSI of over 70 is considered overbought. When it below 30 it is considered oversold. Trading based on RSI indicators is often the starting point when considering a trade, and many traders place alerts at the 70 and 30 marks.

Periods between 9 and 11 are favored by day traders and scalpers, including those who trade in 5 min, 15 min chart, and so on up to hourly timeframes. The default RSI setting of 14 is widely used by medium-term swing traders. Periods between 20 and 30 are chosen by long-term traders and investors.

The RSI(2) strategy gives traders a chance to partake in an ongoing trend. Connors states that traders should buy pullbacks, not breakouts. Conversely, traders should sell oversold bounces, not support breaks. This strategy fits with his philosophy.

The best RSI settings for a 1-minute chart will depend on the trader's preferred trading style and market conditions. However, a common RSI setting for a 1-minute chart is 14 periods with oversold and overbought levels set to 30 and 70, respectively.

One RSI trading strategy used in trending markets would be to wait for the indicator to signal an overbought condition during an uptrend. The trader then waits for RSI to drop below 50, which signals a long entry. If the trend remains in place price will typically recover off this level and move to new highs.

The 5-Star Relative Strength Index (RSI) Strategy-Short

If a bearish candle is formed at the 60 RSI level, the prices may bounce back from there, and one can enter the stock for shorting. The stoploss can be placed at the high of that bearish candlestick, and the target can be the 40 Relative Strength Index levels.

The RSI was designed to indicate whether a security is overbought or oversold in relation to recent price levels. It's calculated using average price gains and losses over a given period of time. The default time period is 14 periods, with values bounded from 0 to 100.

The RSI is most typically used on a 14-day timeframe, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Short or longer timeframes are used for alternately shorter or longer outlooks.

Description. The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.

How do you use 14 day RSI? ›

The default RSI setting for the RSI indicator is 14-periods. That means the indicator is calculated using the last 14 candles or last 14 bars on the price chart. Using a shorter timeframe, for example 5-periods will cause the RSI reach extreme values (above 70 or below 30) more often.

While both are considered momentum indicators, the MACD measures the relationship between two EMAs, while the RSI measures price change in relation to recent price highs and lows. These two indicators are often used together to provide analysts a more complete technical picture of a market.

This strategy is commonly used both in forex and stock markets for reversal trading. when the rsi line reaches and crosses simultaneously at 3 rsi setups i.e at 7, 14, and 21, a signal is generated. This strategy works best in 1-hour timeframe.

A 1-minute scalping strategy refers to a situation where a trader uses the 1-minute chart to conduct analysis and execute trades. In a 1-minute chart, each bar usually represents 1 minute period, meaning that you will be seeing the bars move in real-time.

Relative Strength Index / RSI (14)

The Relative Strength Index (14) – RSI is a momentum indicator that measures the magnitude of recent price changes to analyze overbought or oversold conditions. RSI (14) uses 14 periods to calculate values. RSI values range from 0 to 100.

To reach the best evaluation, experts generally chart the RSI on a daily time frame rather than hourly. However, sometimes shorter hourly periods are charted to indicate whether it is a good idea to make a short-term asset purchase.

RSI oscillates on a scale of zero to 100. It is usually depicted graphically. The formula to calculate RSI is: RSI = 100 – [100 ÷ ( 1 + (Average Gain During Up Periods ÷ Average Loss During Down Periods ))]

This RSI strategy involves changing the default RSI setting of 14 periods to 8 periods. This makes the indicator more sensitive to price changes. The overbought and oversold settings remain the same at 70 and 30 respectively. Also, we will take a 15-mins line chart based on closing prices.

While relative strength index was designed to measure the speed of price movements, the stochastic oscillator formula works best when the market is trading in consistent ranges. Generally speaking, RSI is more useful in trending markets, and stochastics are more useful in sideways or choppy markets.

The RSI 60/40 strategy is a plunge protection long trend system. I have written, tested, and tweaked literally thousands of indicator systems. Yet, this really simple concept has been one of the most profitable when you find the right chart to apply it to.

What is the RSI 50 50 strategy? ›

50-crossover

Traders could use the RSI 50 level (the centreline) to confirm that a price trend is occurring. According to this strategy, a downward trend is confirmed when the RSI crosses from above 50 to below 50. Similarly, an upward trend is confirmed when the RSI crosses above 50.

Two of the most common charting indicators of overbought or oversold conditions are relative strength index (RSI) and stochastics. Developed by J. Welles Wilder Jr. and introduced in the 1978 book New Concepts in Technical Trading Systems, RSI is a measurement of stock price change momentum.

Therefore, the exponential moving average may be considered the best moving average for a 5 min chart. A 20-period moving average will suit best. The MACD indicator is based on the exponential moving averages. Usually, it consists of two lines and a histogram.

The relative strength index​​​ (RSI) is a technical indicator that can act as both a leading and lagging indicator. In its absolute sense, it is a lagging indicator, because the price has to move first for the indicator to start moving in that direction. It basically moves with the price, with a slight delay.

How are RSI and Wilder's RSI different? In RSI, RS uses a simple average of the up and down closes. In Wilder's RSI, RS uses Wilder's smoothing which is a different form of exponential averaging.

The opening 9:30 a.m. to 10:30 a.m. Eastern Time (ET) period is often one of the best hours of the day for day trading, offering the biggest moves in the shortest amount of time. A lot of professional day traders stop trading around 11:30 a.m. because that is when volatility and volume tend to taper off.

MACD Indicator Settings | Intraday Trading

The MACD can be used for intraday trading with the default settings (12,26,9). However, if we change the settings to 24,52,9, we can construct a system with one of the best MACD settings for intraday trading that works well on M30.

Best MACD settings

MACD default settings used by the majority of traders while entering trades are 12-day EMA, 26-day EMA, and 9-day EMA. The MACD can be used for intraday trading with the default 12, 26, 9 settings.

The 9 30 trading strategy is a trend-following strategy that uses two moving averages — a 9-period EMA (exponential moving average) and a 30-period WMA (weighted moving average) — to spot trading opportunities when there is a pullback.

Scalp trading using the RSI

Dips in the trend are to be bought, so when the RSI drops to 30 and then moves above this line, a possible entry point is created.

What is the win rate of RSI strategy? ›

Triple RSI trading strategy backtest

The 78 trades since 1993 are few, but the average gain is a solid 1.4% per trade. The win rate is 90%, and the profit factor is 5. It is a trading strategy with a high win rate.

RSI is best used in swing trading to detect oversold and overbought conditions. Generally, when the RSI moves over 70, the market is considered overbought. When the RSI moves under 30 it is generally considered oversold. Traders use to buy at oversold levels, and sell at overbought levels.

The EMA indicator is regarded as one of the best indicators for scalping since it responds more quickly to recent price changes than to older price changes. Traders use this technical indicator for obtaining buying and selling signals that stem from crossovers and divergences of the historical averages.

In most cases, a scalper can hold a trade for even two minutes. Day traders, on the other hand, can hold trades for several hours. Second, scalping requires opening tens or even hundreds of trades per day. This is simply because the overall profits per trade will be relatively low.

In the Forex market, the highest levels of volume and liquidity tend to occur in the London (08:00 - 17:00 GMT/BST) and New York (13:00 - 22:00 GMT/BST) trading sessions, which make them particularly attractive for most Forex scalpers.

This implies that stock may rebound. Some traders, in an attempt to avoid false signals from the RSI, use more extreme RSI values as buy or sell signals, such as RSI readings above 80 to indicate overbought conditions and RSI readings below 20 to indicate oversold conditions.

The RSI is typically based on a 14-day time frame with high values being 70 or above, and low values being 30 or below. Levels such as 80 or 20 indicate a stronger trend in upward or downward momentum, respectively.

3 timeframes of RSIs: 6, 14 and 24 days. This is the extended version of the "standard" RSI script. How to use it: It has 3 upper bands and 3 lower bands. The 6-day RSI (orange line) corresponds to 80 and 20 bands, which means if 6-day RSI is over 80, it is an indicator of overbought for short term.

In an uptrend or bull market, the RSI tends to remain in the 40 to 90 range with the 40-50 zone acting as support. During a downtrend or bear market the RSI tends to stay between the 10 to 60 range with the 50-60 zone acting as resistance.

Should I sell at RSI 70? ›

The relative strength index (RSI) provides short-term buy and sell signals. Low RSI levels (below 30) generate buy signals. High RSI levels (above 70) generate sell signals. The S&P 500's RSI suggests the recent rally has room to continue.

the standard setting on the CCI indicator is 14, meaning it will measure recent price changes against average price changes over 14 time periods. … a setting of less than 14 results in a more reactive average that oscillates between the +100 and -100 levels more frequently and does not stay in either cycle very long.

The best timeframe for RSI lies between 2 to 6. While the default 14 periods are fine for many situations, intermediate and advanced traders can decrease or increase the RSI timeframe slightly depending on whether the position they are entering is long-term or short-term.

The most common settings that traders tend to watch are: 80/20 where 80 is an overbought level and 20 is an oversold level. 70/30 where 70 is overbought and 30 is oversold.

Low RSI levels, below 30, generate buy signals and indicate an oversold or undervalued condition. High RSI levels, above 70, generate sell signals and suggest that a security is overbought or overvalued.

For a 14-day period RSI, the upper and bottom levels will be: RSI = 70, meaning that the stock is overbought for any RSI above this level, and the upward price trend is about to reverse, causing losses if you do not sell.

During a bull market, RSI values normally sit in the 40 to 90 range, with the 40-50 range seen as support. In a bear market, the reading typically stays within the 10 to 60 range, with the 50-60 zone signaling resistance.