Rsi binary option strategy
The reason behind the popularity of such a strategy is mere common sense. RSI is an integral indicator of momentum, with the help of which traders evaluate the level of current gains to losses. This efficient comparison between the recent gains to losses can further assess when an asset is either overbought or oversold.
Going by the RSI index, when RSI falls below 30, that particular asset in discussion is thought to be oversold, and vice vers. That is a reason to believe that a reversal could occure, not a signal however!
In order to derive trading signals, it plots them on the same chart and makes use of the 9 day MACD of the respective asset. Now, when the MACD goes beyond its 9 day moving average, it indicates a better time for buying and when it goes further below, it indicates selling time.
The market conditions are extremely volatile and there is no hard and fast rule as to suggest in what ways the indicators will derive the accurate results. A plotted chart can anytime give different result than that of a real market situation. So, you should always keep in mind that there is not a single Holy Grail, atleast not in the trading market. To get the signals a moving average is applied to the RSI. This is easily done on free charting platforms like freestockcharts. The standard RSI setting is 14, although that is typically used on daily charts, so if you are trading a shorter time frame you need to do some experimenting.
This seemed to produce decent trade signals once the trend was established. To apply the strategy a trend must be in place. For an uptrend we are looking for overall higher swing highs and higher swing lows in price. For a downtrend we are looking for overall lower swing lows and lower swing highs in price. The trend is up so we are only looking for buy signals. Even though the price is moving mostly sideways from the left to the middle to the chart, the overall trend is down. Therefore we can still take short positions as the downtrend is still in play.
When the RSI moves above 60 it indicates a pullback. Once the RSI has moved above 60 yellow horizontal line we go short the next time the RSI red line drops below its moving average white line. The 40 level during an uptrend, and the 60 level during a downtrend, act as trade filters. By waiting for the RSI to move beyond these levels we are entering the trade during a pullback in the direction of a larger trend.
When the RSI crosses its moving average it signals that the trend is likely resuming. This is only an entry method.