Stochastic RSI Forex Strategy For Beginners

The Stochastic RSI forex strategy is designed to spot frequent up and down swings in the market, thereby allowing for more profit taking opportunities.

This simple trading strategy is excellent for beginners and experts alike and works on every currency pair.

The strategy combines the StochRSI_basic.ex4 custom indicator along with two Exponential Moving Averages i.e. EMA (8) and EMA (14).

Chart Setup

MetaTrader4 Indicators: StochRSI_basic.ex4 (default setting), Exponential Moving Average.ex4 (8), Exponential Moving Average.ex4 (14)

Preferred Time Frame(s): 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, Day

Recommended Trading Sessions: Any

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Initiate a long position if the following indicator or chart patterns are in display:

  1. If the lines of the StochRSI_basic.ex4 custom indicator breaks above the 50.0000 level as shown on Fig. 1.0, it indicates a bullish trend, especially when the gold colored %D line breaks above the aforementioned level, a bullish trend is confirmed.
  2. If the blue EMA (14) crosses the red EMA (8) upwards and aligns itself below price bars, and the EMA (14) also aligns itself below the EMA (8), price is said to be pushed higher i.e. a bullish trend.

Stop Loss for Buy Entry: Place stop loss below immediate support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit on position(s) if the following indicator or chart patterns are on display:

  1. If the lines of the StochRSI_basic.ex4 custom indicator breaks below the 80.000 level as depicted on Fig. 1.0, it is a trigger to exit or take profit accordingly.
  2. If the EMA (8) crosses the EMA (14) downwards, it is a trigger to exit or take profit accordingly. Seemingly, if price closes below the blue EMA (14) line, it further affirms our exit or take profit standings.

Sell Entry Rules

Enter a sell order in the market if the following conditions hold true:

  1. If the lines of the StochRSI_basic.ex4 custom indicator breaks below the 50.0000 level as depicted on Fig. 1.1, it is a bearish trigger i.e. a sell. Take note of the gold colored %D line, if it breaks below the aforementioned 50.000 mark, the bearish signal is confirmed.
  2. If the blue EMA (14) crosses the red EMA (8) downwards and aligns itself above price bars as well having the EMA (14) stay above the EMA (8), price is said to be pushing lower i.e. a bearish trend.

Stop Loss for Sell Entry: Place stop loss above immediate resistance.

Exit Strategy/Take Profit for Sell Entry:

Exit or take profit on position(s) if the following rules or conditions are true:

  1. If the lines of the StochRSI_basic.ex4 custom indicator breaks above the 20.000 level as shown on Fig. 1.1, it is a trigger to exit or take profit accordingly.
  2. If the EMA (8) crosses the EMA (14) upwards, it is a signal to exit or take profit, but if we also see price close above the blue EMA (14) line, it further supports our exit or take profit stance.

Fig. 1.1

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About The Trading Indicators

Developed by Tushard Chande and Stanley Kroll, the StochRSI_basic.ex4 was designed to ramp up the sensitivity and reliability of the usual RSI indicator when trading the overbought or oversold levels.

The EMA (8) and EMA (14) are drawn on the activity chart to plot the mean price while giving more weight to the latest price.

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