Don’t waste your time – keep track of how NFP affects the US dollar!

Data Collection Notice

We maintain a record of your data to run this website. By clicking the button, you agree to our Privacy Policy.

facebook logo with graphic

Join Us on Facebook

Stay on top of company updates, trading news, and so much more!

Thanks, I already follow your page!
forex book graphic

Beginner Forex Book

Your ultimate guide through the world of trading.

Get Forex Book

Check Your Inbox!

In our email, you will find the Forex 101 book. Just tap the button to get it!

FBS Mobile Personal Area

market's logo FREE - On the App Store

Get

Risk warning: ᏟᖴᎠs are complex instruments and come with a high risk of losing money rapidly due to leverage.

76.5% of retail investor accounts lose money when trading ᏟᖴᎠs with this provider.

You should consider whether you understand how ᏟᖴᎠs work and whether you can afford to take the high risk of losing your money.

Easy Intraday Strategy (Candlestick Patterns + RSI)

Easy Intraday Strategy (Candlestick Patterns + RSI)

2022-07-18 • Updated

Information is not investment advice

There are a lot of valuable strategies that require the knowledge of candlestick patterns and oscillators. However, not of them are profitable. When you start trading with them, you can face situations when the strategy is not moving your way. That’s what happens when you don’t do a thorough checkup of your trading strategy. Luckily, we backtested several strategies based on a combination of oscillators and candlestick patterns and chose the best one for you! Please welcome – the RSI and Bullish/Bearish Engulfing Pattern Strategy!

Strategy Setups

Instruments: EURUSD

Indicators: RSI with 11th period

Timeframe: H4

Risk management rules: Fixed trade volume with 0.1 lot

Rules for a long entry

1. Wait for a formation of the Bullish Engulfing pattern. This is the reversal pattern that forms at the end of the downtrend. It consists of a small red candlestick and a large green candlestick that engulfs the red one. The shadows of the small candlestick are short.

1.png

2. The candlestick pattern must be confirmed by the RSI indicator moving below the 40 level.

3. Open you position at the next candlestick after the pattern is confirmed.

4. You must close the short position when the RSI indicator crosses the 70 level to the upside.

2.png

On the picture above you can see an example of this strategy on the H1 timeframe of the EURUSD chart.

After the price formed a pattern known as the Bullish engulfing, we checked RSI and it was moving below the 40 level. We opened a long trade at the opening price of the next bullish candlestick after the pattern at 1.12939. We closed the trade when RSI crossed the 70 level at 1.1340. We earned 461 points.

Rules for a short entry

1. Wait for a formation of the Bearish Engulfing pattern. It consists of a small green candlestick followed by the big red one.

3.png

2. The candlestick pattern must be confirmed by the RSI indicator that should be above the 60 line.

3. After the pattern is confirmed, you need to open a sell order at the next candlestick. It should be bearish.

4. You need to close the short position when the RSI indicator crosses the 30 level to the downside.

4.png

On the chart above, we opened a sell order after the Bearish Engulfing pattern was confirmed by RSI moving above the 60 level at 1.1345. After RSI entered the oversold zone, we closed our position at 1.1298. We earned 470 points.

Backtesting a strategy

5.png

The strategy was tested monthly and yearly and brought good results.

6.png

Let’s look at the profit factor. This metrics shows how much money you make compared to how much money you lose. The test on one year with $3000 of the deposit and the leverage of 1:100 showed a profit factor of 1.40. The figure is greater than 1, so the strategy can be named reliable. Now let’s look at the recovery factor. This is the absolute value of net profit divided by maximal drawdown. The recovery factor is 1.07, which is also greater than 1.  That is, the account recovers from drawdowns fast.  With the size of our account at $3000, the maximal drawdown at 11% is considered normal.

7.png

The test on a monthly period with the same parameters showed a profit factor of 2.06, but the recovery factor was 0.32.  With the size of our account at $3000, the maximal drawdown at 2% is considered normal.

Bottom Line

Now you know the working strategy with just one oscillator and candlestick patterns.  You should definitely try it out!

Similar

Money Flow Index Trading Strategies

Among hundreds of different indicators and technical tools for traders, the relative strength index (RSI) is one of the most popular due to its simplicity and, at the same time, its power in various trading cases. In this article, we want to tell you about another powerful tool similar to RSI but with some cool tweaks.

Choose your payment system

Be on top of your game

Callback

Please fill in the form below so we can contact you

Select the best time for us to call you. We give calls from Monday to Friday in suggested intervals. In case we couldn't get through, we will try again at the same time the next day. For getting real-time assistance, use FBS chat.

We provide only English-speaking callbacks. If you prefer any other languages, contact the support team.

We will call you at the time interval that you chose

Change number

Your request is accepted.

We will call you at the time interval that you chose

Next callback request for this phone number will be available in 00:30:00

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later