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RSI Graffiti Forex Trading Method

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RSI Graffiti Forex Trading Method
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Old 10-04-2009, 09:45 PM
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This trading method can be one of the most profitable method lying around. Not only this, but it can be among the simplest to trade as well. This method can work on any timeframe and any pair. If you know how to draw lines on a chart, then you are good to go.

With this system, we are going to use one of the most popular indicator which is none other than the RSI. This indicator all the trading platforms which I know of. The RSI is a very powerful indicator and it is very responsive to market changes most of the time. Place the RSI on your chart and set it to 21. You can make the RSI a little thick to make it more visible as we are going to use it very thoroughly.

We are going to use trendlines and support/resistance line for our trade entries. But first of all, we will need to draw these lines and we are NOT going to draw it on the price chart itself as this is the normal practice but we are going to draw these lines on the RSI indicator window. We can do this very easily... we just eyeball the RSI indicator and draw the trendlines if we see if going in and upward or downward direction. We also need to identify levels where the RSI gets difficulty to go through and we draw a support or resistance line there. This is easy to identify, we just need to look for 2 peaks at the same or near levels.

After you have successfully draw these lines, you just need to sit and wait for the RSI to break through these lines. Once it does so, you just open a trade in the direction of the break and you place your stoploss at recent swing high or low depending on the direction you are trading. Now let us look at a few trade examples:


In the example above, we have a resistance level which formed and we waited for the RSI to gather some momentum and break through it and as you can see, this trade proved to be a good one.


In this second example, we have a support that formed and we waited for the RSI to break through it and once it did that, we took the short. Please take not that the SL was at the recent swing high and since price did not retrace back that high, we were kept into the trade and we took a good profit from it as well.


In this last example, firstly we have drawn and up trendline and we waited for the RSI to break through it, and once it did, we took the short trade which gave us a nice bunch of pips. Secondly, while the price was falling, the RSI was falling as well and this lead to the formation of a down trendline, we watched this closely as well and once the RSI broke this trendline, we took a long and this gave us many pips as well. Setups like this can happen a few times, especially when the market is ranging.

As you have see in these 3 examples above, we have been working with the generic trendline and support/resistance lines on the RSI and not on the price and this has proves out to be a good deal. Please take note that this is the basic skeleton on the trading system. Although it can work all by itself, you can tweak and modify it on your own to make it more powerful. You can add more indicators to the chart to filter the false breakouts as this happen a few times as well.

I hope that you have enjoy this reading and if you want to give this system a try, then you are welcome. Do not forget to share your experience and ideas here. I would like to hear back from you fishermen...

Good luck
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Old 10-05-2009, 10:27 AM
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Thank you for your nice words... this method can be used with other indicators as well such as the CCI or the Momentum.
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Pat
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Old 10-05-2009, 12:28 PM
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Please can any body help me in how to find surport and
resistant levels.
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Old 10-05-2009, 08:15 PM
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Interesting setup but I’m curious why you use 21 for the RSI. 21 looks pretty flat and it can be hard to catch a breakout. I use the RSI but use the standard 14.
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Old 10-05-2009, 08:29 PM
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Quote:
Originally Posted by Max99 View Post
Interesting setup but I’m curious why you use 21 for the RSI. 21 looks pretty flat and it can be hard to catch a breakout. I use the RSI but use the standard 14.
You can change the RSI period as to your liking but a shorter RSI period will usually produce a more curvy line and these will in turn produce more false breakouts. When using a longer RSI period, you can trade the short term trend with more ease. Also, the SR etc are easier to spot... However, as I said, the system is very open and the idea is just the skeleton of a bigger and more complex trading system... keep posting your trades and ideas.
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Old 10-05-2009, 10:26 PM
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Quote:
Originally Posted by bossxero View Post
You can change the RSI period as to your liking but a shorter RSI period will usually produce a more curvy line and these will in turn produce more false breakouts. When using a longer RSI period, you can trade the short term trend with more ease. Also, the SR etc are easier to spot... However, as I said, the system is very open and the idea is just the skeleton of a bigger and more complex trading system... keep posting your trades and ideas.

You know what, that does make sense, I think I'll take a look at 21.

I know you said to just draw the trendline on the RSI but what I do is draw trendlines on the RSI and the chart. I look for breakouts and/or divergence. Also, I'm more of a "scalper" and use a 5m chart. What time frame do you like for your setup?

Can you give us a hint about your "bigger and more complex trading system"?
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Old 10-05-2009, 10:38 PM
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Looking for divergence itself is the very start in developing this method further... however, i do not personally trade divergence... and I my posts are aimed mostly at those new to forex who need simple systems to start with...

As for me, I am also trying to define a scalping method with this method as its base.. so far, it is working nicely... However, the method I am using is not exactly as mentioned here... I look for the trendlines and support/resistance lines on the indicator, then I draw the lines... Second I wait for the breakout of these lines on the indicator window.. however, I do not take the trade immediately on the breakout... I confirm this breakout first by looking at the price action on the bar chart... for instance, if the indicator broke a support and is going down, I will confirm this down break by observing the price and see if it is breaking the most recent low it made... if it breaks, then I might take the trade, or what for price to retrace around 38% before taking the trade... this is very discretionary type trades and mostly based on price action... So far, it has been working well for me... I am using this to scalp on the eurusd M1 charts... You can see performance here minus the 2 first gbpjpy trades as they were trades not related to this system... was lazy to open another test account...

MT Intelligence - Results for bossxero

All the best
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Old 10-05-2009, 11:17 PM
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Thanks bossxero. I understand what you are talking about regarding price action. I was looking at higher time frames earlier and now that I look at the 1m I see the RSI looks better and not so flat. I normally trade on the 5m and will look at the 1m for price action but I like the idea of using this on the 1m. I’m going to start watching it and hopefully we can develop this setup more.

I was looking at your results. I only trade EUR/USD also. It looks like you don’t have a set profit target. Are you just using price action for your exit? What about stops? Some losses were more than others, so you don’t use a set stop?

One last question. What hours do you trade? There are times on your results but I don’t know what time zone that is. I’m in Chicago and I’m too lazy to get up for the London session so I trade from 8:00am EST to 12:00 EST. Though I will sometimes take trades in the afternoon.

Sorry about all the questions but thanks for your help.

Max
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Old 10-06-2009, 12:45 AM
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For the stoploss, the initial stoploss is set at the recent swing high or low.. and I move my stop to breakeven as soon as I can. As for the TP, I do not use fixed exit and I will usually exit when I see price starting to show reversal signs such as bouncing off a support line. I do not observe any time session while trying to test this system as it is a test system for now. I try to trade/practice/tweak/refine it whenever i have some free time in hand. Thanks for the questions and hope I have answered them.
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