The Relative Strength Index

I will share with you a beginners guide for long term swing trading using the RSI and another momentum indicator which i find to be really useful. This system can be used by almost anybody and gives really good results, however, the wait to enter a trade is normally very long so you need patience. Isn’t the saying, “good things come to those who wait?”

For this system, the first indicator I put onto the chart is the 200MA and everything is done on the daily chart. If price is above the 200MA and the same moving average is slanted in an upwards direction then and only then I go into the next phase of the plan. If price is below the 200MA we would then technically be in a sustained downtrend. (See picture below)

After we have the 200MA on the chart, the other two indicators I use are the RSI and the Stochastic, but not just any Stochastic, the one I use is pictured below in the first screenshot and I find it is very good. Anyway, once you have your chart setup, draw a horizontal line at the 50 point on the RSI indicator and then both conditions must be fulfilled to enter a long position.

1. The RSI line must be below the 50 line on the daily chart.

2. The Stochastic Momentum Indicator must be below the blue line and preferably touching the green line or just under it.

Now the system may not give you the exact bottom but if you look at the second picture down you will see 5 entries from Sep 2020 to April 2021 and maybe a 6th entry as I am writing this blog now. That is less than 1 entry per month, not a lot if trading but when the signals appear they are normally very strong.

You can improve the accuracy of this system by adding support and resistance areas and high volume transaction places to get closer to a bottom, but I have written this post with beginners more in mind.

Let me know what you think in the comments.

None of this information is financial advice and mainly based for educational purposes.

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