Rsi Breakout

hi all.

i would like to start a thread on a system i was developing several years ago, but abandoned it as had no time for it - it's a manual system.

the system uses only one indicator - rsi, and depends purely on price action. the rsi is meant help spot divergence/convergence, and is only to confirm the trade.

basically, i look for channels of support and resistance, once those are spotted i chart the same channel on the rsi. going to a lower time frame and checking for divergence/convergence.

i'm sure many here will be able to tweak it to create a full trading system.

the system is called rsi breakout as this is what we look for when executing a trade.

now let's see an example forming right now on the eur/usd:
on the 4 hour chart we can clearly see a downward channel
<a href= target='_blank'><img src= /></a>

going to the 1 hour timeframe, we can clearly see divergence happening:
<a href= target='_blank'><img src= /></a>

what i now look for is a breach of the rsi in one of the timeframes - this will usually indicate a breakout of the channel before it actually happens.

will post some more examples later.

let me know what you think.

hi biz0101, we keep bumping into each other lol, nice rsi system idea, ive recently developed my own system, i designed based on very strict trading rules. my system uses the RSI with custom settings, equidistant channels and price action, also i grid position trades within a 70% range of daily hi-lo's with a max of five grid positions, so the death trade(5th) hits profit but only by 5-10 pips, strangely it is working in trending markets very well (so far).

even those who use EA's, many slam robots, but after all, these robots simply follow trading rules that someone somewhere used manually and programmed it to automated. hehe the trick with robots is you still need knowledge,discipline and patients and of course still manage the automated trades, it just means less time sat at the pc.

i think the penny drops or, in most cases never does, hence why a few make it in forex, basic set of indicators,trust them and yourself,discipline and lots of patients and persistence = trading success with time.

hi ubernova.

yes i agree with you, seems like people think there is a magical set and forget it robot, which will make them rich in no time. due to the dynamic nature of markets the program should be tweaked to keep it ahead of the market.

your system sounds as if it's uses to many filters..how many trades does it produce weekly? i bet no more than 5.
had some experience with equidistant channels, but found them to be too lagging, they just change after the trade has opened, so couldn't make good use of it.

i would program my system if it was possible, but it's just too discretionary - it would be very hard or next to impossible to try and program this.

ok, here's the setup.

<a href= target='_blank'><img src= /></a>

missed it a bit, but there's a re-entry point as the price went back to it's new support, and is now ready to go up.

sl and tp are defined, and currently are equal.

been away for a few days..

last setup failed, but as we all know they can't be all winners.

here's a setup that actually played out well.

the same 4h chart, price hit the major support and bounced back.

<a href= target='_blank'><img src= /></a>

check the breakout, the rsi resistance is penetrated before the resistance on the actual chart - this is exactly what i'm looking for. Again notice the divergence in the same timeframe (which indicates a stronger signal).

with a risk:reward ratio of 1:1, this trade would have been a winner.

Another good setup happening right now.. not much to explain as i've explained everything in the image

<a href= target='_blank'><img src= /></a>

it's on the eur/usd 4h timeframe.

Ok, here it goes - based on the last chart yesterday, i just got into a long position. levels are seen on the chart.

<a href= target='_blank'><img src= /></a>

although there is a breakout in the rsi, the divergence is a bit weak, so i believe the price will have another high before plumbing straight down.

we'll see how it plays out.

correction for the image from yesterday - this is not a hidden divergence rather a regular one. sorry for the confusion.

the trade playing out nicely as you can see:

<a href= target='_blank'><img src= /></a>

at this point the tp profit can be increased (with extra risk) as the price naturally drawn to the nearest resistance, although i prefer to leave it at that.

we'll see if the price stops at the resistance. if the price breaks the rsi resistance, the short side is immediately off. if it halts there, we will start looking for an entry for a short position.

ok, price went straight through the tp.

<a href= target='_blank'><img src= /></a>

as seen in the chart, price is now at resistance - looking to see if it halts there or keeps going up.

once it starts going back down, we'll go to a lower time frame to find another rsi breakout.

since this is a major resistance break of the september 23 high, i wouldn't be surprised to see the price going higher.

looks like the short side is off for now.

looking at the 1 hour chart:

<a href= target='_blank'><img src= /></a>

although there's divergence, the price is making higher highes, and higher lows, which implies it's going to break up from it's current triangle (see rsi).

if someone is planning to play the long side, breakout of the divergence as seen in the 30 minutes charts will be an excellent entry point.

<a href= target='_blank'><img src= /></a>

no trade opportunities were encountered yet.

looking on the 4 hour time frame, it's seen that price broke the rsi channel:

<a href= target='_blank'><img src= /></a>

so i'm looking to go short on a retrace, going to 1 hour time frame, i'll wait for the price to retrace to the rsi's channel resistance:

<a href= target='_blank'><img src= /></a>

here's a new setup - this is a high risk trade since we go against the trend but the risk:reward is what makes it worthwhile.

<a href= target='_blank'><img src= /></a>

enter is at the top resistance channel, stop should be just above the previous channel peak, target is the channel's support.

price already tried twice to break the channel with no success:

<a href= target='_blank'><img src= /></a>

looks like bulls are fighting the bears. nevertheless, anyway it goes - you can be sure it will be a strong move of at-least 100 pips.

if my stop loss hits, i will be looking for a retrace to enter a long trade (i'm currently short as seen from previous post).

Hey biz, Thanx for sharing... Nice work... !!

thanks Rana..

the price broke upside, so i'm looking for an entry to the long side:

<a href= target='_blank'><img src= /></a>

there are 2 possible entries as seen in the image, and the sl area is the last low of the channel in the 1d timeframe.

first buy zone hit, opened a long trade.

second zone hit, opened another trade.