60 RSI, ATR and SMA Trading System

Submit by Janus Trader 20/12/2011

Time Frame 4 H or Higher

Currency Pairs: any

Indicators:

RSI (8), with (EMA 8 and ATR 20)

SMA (28)

Long entry rules

Enter your long trade when the RSI crosses its moving average. We BUY when RSI crosses the moving average from below (red box and line). It is vital to note that a cross is only validated after the daily candle has closed. We don’t take a trade on the day when the cross has formed as it may disappear later in the day.

We enter the trade as soon as the new candle is formed i.e. at the opening price.

Short entry rule

Enter your short trade when the RSI crosses its moving average. We SELL when RSI crosses the moving average from above (blue box and line). It is vital to note that a cross is only validated after the daily candle has closed. We don’t take a trade on the day when the cross has formed as it may disappear later in the day.

We enter the trade as soon as the new candle is formed i.e. at the opening price.

Stop loss

We will use the percentage of the ATR (Average True Range) as stop loss level. The ATR shows

numerically volatile a currency has been recently. A small ATR (30-50 pips) shows the daily

ranges have been small, this currency pair is moving very little. A higher ATR (100-200 pips)

shows a currency pair on a rollercoaster ride, either in a strong trend or ranging wildly.

Obviously for a high ATR we need a bigger stop to give the trade some room to breathe. The

ideal stop loss level is a stop of 75% ATR(20)

Exit trade

No rules for exit in this method. You can just let the trade run for as long as you wish with a moving stop loss or lose the trade at the end of the day.

Long Trades Examples

Example 1

In this example, the EUR/USD was traded. When the cross happened on this day, we just

waited for the next day and entered our long position at the opening. The ATR value at the

time we entered our trade was 0.0145 which means 145 pips, so our stop loss level was set at

0.75 x 145 = 109 pips below the entry point. This trade was going up in out favor direction and

ran for 14 days when it was closed. The profit was 1500 pips

4

Short Trades

Example 1

In this example, the EUR/USD was traded. When the cross happened on this day, we just

waited for the next day and entered our short position at the opening. The ATR value at the

time we entered our trade was 0.0158 which means 158 pips, so our stop loss level was set at

0.75 x 158 = 119 pips above the entry point. This trade was going down in out favor direction

and ran for 4 days when it was closed. The profit was 1230 pips

Comments: 1

#1
Quantalpha Algorithms (Sunday, 11 August 2024 15:24)

How come that the RSI and MA will cross when RSI is a sub-chart indicator while MA is on-chart indicator? How did we come up with this strategy considering their (indicators) nature in the chart positioning?