Friday, September 19, 2014

Best Relative Strength Indicator Combination

August 4, 2010 by  
Filed under Forex FAQ


This is a question that is asked by one of our fellow traders in this blog.

I have been using Relative strength Indicator as my primary indicator to do my scalping, but sometimes, it fails me in my trade. Is there any other forex indicator I can combine with the Relative Strength Indicator to make my trade better?

Therefore in this post, I will be sharing with all of you what I think is the best forex indicator combination to go with RSI for a scalping trade. However if you have anything to share, do feel free to comment below as your input will be very useful for this community.

I always like to have a different variety of indicators in my trading as they will be able to show me different views of the trade that I am going into.

For scalping trading system, below are what I think is the best to combine with your relative strength indicator.

1) MACD Indicator – The relative strength indicator is used to tell you whether the market is currently overbought or oversold. However it will not be able to help you to confirm if the price is going to be repelled by a major support or resistance.

In this scenario, you can make use of the MACD histogram to help you verify your trade. If you are going for a short trade after you see the RSI going overbought. You should check the histogram of the MACD for more confirmation. When you see the histogram getting shorter and shorter on the upside, it is a sign that the buyer are weakening and the seller are gaining strength and this will give you more confidence when entering a short trade.

If you are planning to go for a long trade, you should make sure that you see the MACD histogram getting shorter and shorter on the downside.

2) CCI Indicator - Other than the MACD, you can also make use of this CCI to help you in your scalping trade. As stated in one of my post about the CCI, you can enter a short trade when you see this indicator moving below the 100 level and you can enter a long trade when you see this indicator moving above the 100 level.

The above are what I think the best forex indicator combination to go with your relative strength indicator. However this is strictly my personal opinion and you should always try it out on a demo account to see if it works for you before trading live with it.

I hope that I have answered your question and do participate in our monthly question and answer session.

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Comments

5 Responses to “Best Relative Strength Indicator Combination”
  1. A-soltani says:

    Hi again

    Thank you very much Kelvin.

    I work the same way and most time it is work perfect right.for more confidence it is possible use of daily DTS(8,5,3,3) that developed by robert Miner, (or stoch 5,3,3) after it exhaust from crossover in over B/S area..

    Best Regards

  2. Rockdrop says:

    Hi Kelvin,

    I don’t clearly get this part “If you are planning to go for a long trade, you should make sure that you see the MACD histogram getting shorter and shorter on the downside.”

    thanks!

    • Kelvin says:

      Hi Rockdrop

      If you take a look at your MACD indicator, you will find the histogram flipping up and down the zero line.

      What I mean is when you are looking to go LONG, you should check the histogram to see if it is below the zero line and each bar produced should be shorter than the previous bar as this is a sign that the buyer are gaining strength.

  3. A- SOLTANI says:

    DEAR Mr. Kelvin

    Hi there is sometimes that I recieve your mails and sharing comments .they are pro and very usefull for planning a system.
    I usually identify Trend and market position on H4 chart and for timimg use H1. I use almost the same indicators and sysytem that you suggest and result is profitable.
    would you please explain about trend reversal confirmation tools and signs.

    • Kelvin says:

      Hi

      I am glad to hear that you are a profitable trader and this is encouraging.

      For trend reversal, you can either make use of divergence or moving average crossovers to identify a possible trend reversal. The reason why I say it is a possible instead of a sure reversal is because there are times where it is simply just a retracement and not a reversal.

      There is no way you can accurately identify a reversal and this is something even those professional traders from institution cannot tell.

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