Every trader carries a favorite trading setup, a personalized toolset crafted to align with their style, instincts, and strategy, reflecting their unique pathway in the ever-changing financial markets.
This thread is all about one of my favorite Setup of "Two Bullish/Bearish candles & RSI (3) >80/<20."
I will explain every detail of this setup in this thread, so let's get started.
I will explain every detail of this setup in this thread, so let's get started.
The Bullish setup requires two bullish candles.
The current green candle should close above the High of the previous green candle.
The low of the current candle should be greater than the previous candle.
& RSI (3)>80: The default value of RSI is 14, so it needs to change to 3.
The current green candle should close above the High of the previous green candle.
The low of the current candle should be greater than the previous candle.
& RSI (3)>80: The default value of RSI is 14, so it needs to change to 3.
The Bearish setup requires two RED candles.
The Close of the current candle should be lower than the previous candle's low.
The High of the current candle should be lower
than the previous candle's High.
& RSI (3)<20: The default value of RSI is 14, so it needs to change to 3.
The Close of the current candle should be lower than the previous candle's low.
The High of the current candle should be lower
than the previous candle's High.
& RSI (3)<20: The default value of RSI is 14, so it needs to change to 3.
Why RSI(3): as we all know, RSI is a lagging indicator because the price has to move first for the indicator to start moving in that direction.
So making it from lagging to a leading indicator, I tried playing with its default value. & I got the best result when I changed it to 3
So making it from lagging to a leading indicator, I tried playing with its default value. & I got the best result when I changed it to 3
Before implementing any setup, we should understand the broader trend of the market. So to understand the direction of the market, we will use 50EMA on any timeframe.
If the price is above 50 EMA, consider the broader trend is bullish & below 50EMA, the trend will be bearish.
If the price is above 50 EMA, consider the broader trend is bullish & below 50EMA, the trend will be bearish.
Best scenarios to use this setup:
The best time to use this setup on any time frame is after the consolidation, in line with the broader market trend.
Consolidation is the essential element of this setup & thus increases the hit ratio of this setup.
The best time to use this setup on any time frame is after the consolidation, in line with the broader market trend.
Consolidation is the essential element of this setup & thus increases the hit ratio of this setup.
Instructions about initiating the setup :
In the case of a Bullish setup, place the bet above the High of the current candle + some buffer.
& place the SL below the previous candle's low - some buffer.
In the case of a Bullish setup, place the bet above the High of the current candle + some buffer.
& place the SL below the previous candle's low - some buffer.
In the case of a Bearish setup, place the bet below the low of the current candle - some buffer.
& place the SL above the previous candle's High + some buffer.
Book the profit at 1:1.5 & 1:2.
& place the SL above the previous candle's High + some buffer.
Book the profit at 1:1.5 & 1:2.
While a trading setup serves as a guiding compass in the market, traders must tread cautiously knowing that it's not a holy grail Strategy
It's also essential to manage your risk appropriately & ensure that your trading strategy aligns with your risk tolerance.
Happy trading!
It's also essential to manage your risk appropriately & ensure that your trading strategy aligns with your risk tolerance.
Happy trading!
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