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1. Introduction
In Japanese Candlestick Charting Techniques, Steve Nison included a section on using candlesticks with oscillators including stochastics, RSI, and moving average oscillator. According to Steve Nison, oscillators are objective and augment the more subjective candlestick patterns.
In this article, we will focus on trading using RSI and candlestick patterns. RSI measures the momentum of gains and losses.
The relative strength in the formula refers to the ratio of average gain to average loss. These averages are calculated in a way similar to the exponential moving average, before turning the relative strength into an index that fluctuates between 0 and 100.
Other than RSI divergences in our trade setups. Divergences occur when RSI does not support prices. The charts below illustrates RSI divergences, we will also look out for candlestick patterns.
2. Short Entry Rules
  1. A bearish divergence between RSI and the price.
  2. Sell with a bearish candlestick reversal pattern (Bearish Engulfing / Shooting Star / Bearish Harami) .

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WallStreet6 avatar

Good one!

Alexander22 avatar

great article

klintons avatar

Good job :))

egg avatar
egg 18 May

Dobrze napisane.Dziękuje celu przydatne

Eleonorra avatar


orto leave comments
A couple of weeks ago I got a private message from a community member, asking me to write something specific to short-term traders, if possible. Taking the request into consideration I'm going to describe a trading technique where trades will last two days only, no more no less. If two days is already long term for you, this system can be adapted to shorter time frames, although the results will be poorer, so take that into consideration. _________________________ ► What is an inside day? An inside day (also called inside bar/candle in intraday charts) occurs when the highest price is lower than the previous day's high, and the lowest price is higher than the preceding day's low. Here's a perfect example: The common interpretation of inside days is that they are a sign of consolidation, where neither supply or demand are in control. It can also be considered a pause in a current trend, or the early signs of a counter trend movement. So, basically, it's a neutral candle that does not provide any positive trading edge. Well...not so fast, young Jedi! In trading, it helps to be a free-thinker and avoid subscribing to what the herds say. Try to look at your charts from a diffe…
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DumbAsArock avatar

Extremely well written and presented. +1

GreenTrader avatar

good job +1

citikot avatar
citikot 4 Mar.

good job! +1 also!

foxybaby avatar
foxybaby 7 Mar.

Good strategy, would there be an automated strategy for jforex available?

fprophet avatar
fprophet 12 Mar.

When trading Engulfing Bars I believe we need to take into account any near Support/Resistance and/or significant Round numbers - and then if we are not in danger of bouncing off any these and the BBands are widening ... then it looks like easy money - but of course then there are only a few set-ups per month per instrument.

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