I am following very simple trading plan based mainly on RSI and ADX.
Now whenever we wants to initiate trade then firstly we have to decide BIAS for direction.
BIAS based on RSI as follows-
RSI Above 55-Long.
RSI below 45-short.
RSI between 45-55—- neutral.
Continue
Momentum study guides us for exposure in our long or short trade.
Momentum based on RSI is as follows-
RSI— 55-60~mild long(25%),
RSI— 60-65~moderate long(50%)
RSI— 65-70~strong long (75%)
RSI Above 70~ very strong long (100%)
Momentum based on RSI for short trades is as follows-
RSI— 40-45~mild short (25%),
RSI— 35-40~moderate short (50%)
RSI— 30-35~strong short (75%)
RSI below 30~very strong short (100%).
Please note, one need to check RSI at closing of the day for continuation of trade and exposure.
Now finally trend confirmation.... ADX is very simple and effective tool to judge the underlying is trending or not...whenever adx is rising it gives confirmation of trend formation and when adx crosses 25, it suggests strong trend formation.
When adx is rising and bias is on long side then trend is uptrend.
Similarly with rising adx and short bias gives confirmation of downtrend.
