Tagged: trend following

RSI Trend following strategy

This strategy will use RSI to enter trades with the prevailing trend instead of looking for trades that bets on mean reversion.
In essence, we will be buying when its Overbought and sell when its Oversold.

Set RSI (9) on with 40-60 overbought oversold lines.
For longs:
When a bar closes with RSI above 60, we will go long at the open of the subsequent bar.
We will have our stop loss at the low of the past 10 days and trail as such.
We will also exit when a bar closes with RSI below 40. In which, we will have stopped and reversed our position to go short.
For shorts:
We will do the opposite and go short when RSI goes below 40 and place our stops at the 10 day high.

RSI and 10 day exit strategy

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20 day High and Low Breakout

20 day High and Low Breakout

Trading entries based on new price highs and lows of N days/periods ago are as old as trend following and breakout trading itself.
However, it is not too much to say that Turtle trading and the Donchian price channel breakout methodology pushed it into the mainstream.
The trading rules are simple and straight forward. As with any trend following strategies, it performs best in a market that has large price moves and sustained trends.

Currency pairs: EUR/USD, EUR/JPY, GBP/USD, GBP/JPY and USD/JPY.
Indicators: 20 and 10 Donchian channels, 14 ATR

Japanese Yen currency pairs perform best and often have sustained trends probably due to the popularity of Carry trading strategies.

For Longs/Buys:
Set Long/Buy order 2 pips above the High of the previous 20 days.
Initial stop loss will be equal to ATR.
The 10 Day low will be our trailing stop when price move further up. Stop is placed 2 pips below it.

For Shorts/Sells:
Set short/sell order 2 pips below the Low of the previous 20 days.
Similarly, initial stop loss will be 1 ATR away.
The 10 Day high will act as our trailing stop when price moves further down. Stop is placed 2 pips above it.

20 day low is 1.5125, sell order at 1.5123
ATR is 145, so initial stop loss is 1.5268
10 day high is 1.4611
Exit trade at 1.4613
Profit is 510 pips on 145 pips risk. (3.5 times)
20 day high is 1.4770, buy order at 1.4772
ATR is 197, so initial stop loss is 1.4575
10 day low is 1.5561
Exit trade at 1.5559
Profit is 787 pips on 197 pips risk. (4 times)20-10 donchian 20-10 donchian-closeup

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