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7 RSI Trading Strategies That Will Boost Your Trading Prowess 01/11/20, 1'11 PM

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7 RSI TRADING STRATEGIES THAT WILL


BOOST YOUR TRADING PROWESS
By Galen Woods in Trading Setups on May 25, 2018

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7 RSI Trading Strategies That Will Boost Your Trading Prowess 01/11/20, 1'11 PM

The Relative Strength Index (RSI) designed by J. Welles Wilder is a popular and versatile trading
indicator.

You can vary its lookback period, combine it with different trading tools, look for divergences, and
even draw trend lines on it. Each method produces a unique tool that enables diverse strategies.

Here you will find seven RSI trading strategies that showcase the different facets of this powerful
indicator. Before you jump in to explore the trading strategies below, make sure you understand the
basics of the RSI indicator.

Also, bear in mind that these trading strategies are not perfect and are unlikely to be profitable
when traded mechanically.

However, by examining these diverse RSI trading methods, you will gain helpful insights into J. Welles
Wilder’s most famous indicator.

LIST OF RSI TRADING STRATEGIES


PRICE ACTION TRADING COURSE TRADING SETUPS TOPICS ↓
1. 2-Period RSI

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7 RSI Trading Strategies That Will Boost Your Trading Prowess 01/11/20, 1'11 PM

2. RSI with Support & Resistance Zone For Day Trading


TSR TRADING GUIDES RESOURCES MEMBER LOGIN

3. Divergence with Candlestick Patterns

4. Trend Confirmation (Midline Analysis)

5. Failure Swing

6. Trend Lines

7. Range Shift

STRATEGY #1: RSI2

The 2-period RSI is the brainchild of Larry Connors. This unconventional lookback period turns the
RSI into an incredible short-term timing tool.

Learn more with these links:

Explanation of the original RSI2 strategy by ChartSchool

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A modified approach that uses the RSI2 for determining the market bias as well

STRATEGY #2: RSI + S/R (FOR DAY TRADING)

If you think that trading is like hunting, you will agree that patience is a virtue. This trading method
works well for the patient trader.

Its premise is simple. It looks for support and resistance zones to confirm oversold and
overbought signals respectively.

How To Use The RSI For Day Trading

STRATEGY #3: RSI DIVERGENCE + CANDLESTICKS


Candlestick patterns alone are never sufficient to call a market top or bottom. You need a tool that
can point you to what’s happening in the broader context.

The RSI can fulfill this role if you use it the right way – to identify price divergences.

Trading Candlesticks With The RSI

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STRATEGY #4: RSI MIDLINE FOR TREND ANALYSIS


The 30 and 70 lines indicate oversold and overbought respectively in the standard RSI interpretation.
But they are not the only lines you should observe.

Another equally significant level is the midline at 50. If the RSI stays above 50, it’s likely to be a
bullish market. If the RSI remains below 50, a bearish market is dominant.

These are two strategies that make use of this observation:

RSI Trading Strategy With 20 SMA For Swing Trading

5 SMA With 5 RSI Forex Trading Strategy

Both setups combine a moving average with the RSI indicator. However, they are not gunning for the
same trades. Study them side-by-side to uncover their differences.

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7 RSI Trading Strategies That Will Boost Your Trading Prowess 01/11/20, 1'11 PM

STRATEGY #5: RSI FAILURE SWING


Wilder saw the RSI Failure Swing as a powerful reversal signal.

One important principle for the Failure Swing is that it is independent of price. The implication here
is that you should ignore the usual RSI divergences.

These two articles have excellent sections covering RSI Failure Swings. For each link below, you need
to scroll down to the Failure Swings section.

Overbought Or Oversold? Use The Relative Strength Index To Find Out

Relative Strength Index (RSI)

STRATEGY #6: RSI TREND LINES


The RSI allows for direct trend line analysis. It means that you can draw trend lines on the RSI just
like what you usually do for price action.

This article from Trendline Mastery shows a detailed RSI trend line trading example using multiple
time frames (from the weekly down to the 4-hour chart).

A Top-Down Trade Executed Solely on RSI Trend Line Analysis

STRATEGY #7: RSI RANGE SHIFT


Andrew Cardwell developed a framework to categorize market conditions with the RSI.

This concept might look intimidating and radical at first. But its core idea is simple.

The premise is that the RSI is typically trapped within a range, given a market mode (e.g., bullish,
bearish, sideways, etc.). Think of it as an advanced version Strategy #4 above that uses the RSI
midline.

This article has an image that explains the five types of range shift for the RSI indicator.

How to effectively trade using RSI- the Andrew Cardwell way?

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7 RSI Trading Strategies That Will Boost Your Trading Prowess 01/11/20, 1'11 PM

The first chapter of this book by Constance M. Brown is titled Oscillators Do Not Travel Between 0
and 100. It covers the concept of RSI range shifts.

That’s it!

Here are seven trading strategies that can empower your RSI analysis. But do not try to apply them
all at once. You will get confused if you do that.

Go through them one by one, and pick out those that truly benefit your current trading style.

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Read more about Divergence, RSI, Trading Indicators

Serious Traders Only!

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Day Trading With Price Action – A complete course that teaches you the art of price action
trading.

Perfectly structured with step-by-step guides to help you understand the principles of price
action analysis.

CLICK HERE FOR THE COURSE SYLLABUS

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