RSI and EMA Signals
Trader’s tool portfolio includes several different strategies. Every sane person engaged in trading tends to choose for himself the most profitable, stable and also less risky strategies according to the different trading conditions.
RSI + EMA’s strategy is one of those stable strategies, which is characterized by a small percentage of lost trades.
In this strategy, we will use two EMAs and RSI. We can use this strategy in trending pairs, but it may also work on other pairs that demonstrate high volatility. We recommend using this strategy from H1 timeframe or more.
Learn how to recognize bullish and bearish markets
As has already become clear from the title, the basis of this trading strategy consists of the RSI indicator and 2 exponential moving averages (EMAs).
This binary options strategy is very simple, the trade is conducted on the hourly chart (H1), it is necessary to set the EMA (to the close) with a period of 5 and 21 and RSI indicator with period of 21. All these indicators are included in any standard set of Metatrader 4 trading software.
EMA 21 – is the most powerful moving average in this strategy, it indicates the long-term trend of the currency pair. When the price crosses EMA 21 upwards, it means the beginning of an uptrend of the pair.
When the price is below the EMA 21, then there is a downtrend in the market.
RSI value above 50 indicates a bullish market, below 50 – a bearish market.
Learn when to buy call or put option
In RSI indicator properties we should set level of 50. Once 5 and 21 EMA cross up and the RSI crosses above the 50 level – we should buy Call option (remember - the deal should be done only after the closing of hourly candle and on new candle opening).
On the contrary, as soon as the EMA cross on the graph down, and the RSI is below 50 – we should buy Put option (please remember that the transaction should be opened only after the closing of hourly candle and new hourly candle opening).
The best situation is when both intersections occur simultaneously (the intersection of EMA’s and the RSI crosses 50 level). You can choose every currency pair for trading. Traders should set the expiration time by 3 or 4 hours after option buying.
For the first time (the situation on the left) - first intersection of moving averages happened, but we had a deal only a few hours later, after the RSI has crossed the 50 level and closed below it.
The second time (the situation on the right) - the intersection of the MA’s and RSI occurred for 1 hour after the closing of hourly candle Put option has been bought.
We still recommend risking no more than 0.5-2% of the capital amount on each deal.
This strategy is based on the use of two of the most popular indicators that are included in all trading platforms. Although this strategy is very simple, it can be very lucrative if you use it wisely.