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Trend Envelopes RSI is a specially developed trading algorithm that is based on the functioning and general calculations of the RSI indicator, which is included in the standard forex set. The indicator is used in trend trading, that is, the direction of the trade is formed taking into account the current trend, which in turn is characterized by the calculation of indicator. Trend Envelopes RSI is presented below, in a separate window of the price chart, in the form of one main line, namely the RSI line, which moves in a certain direction relative to the signal level 0, while next to the main line there are additional lines of a certain color and direction, respectively. In this case, the indicator window also contains dots of a certain color, thanks to which it can not be only determined the direction of the trend and the trade, but also found the best moment to open it.
The Trend Envelopes RSI indicator is equally effective when choosing any currency pair and timeframe, so any convenient values of these indicators can be chosen.
Input parameters
The settings of the Trend Envelopes RSI indicator consist of only four input parameters, however, a small number of them does not affect the effectiveness of the indicator, but on the contrary, create simpler conditions for its use and installation for own trading. In addition to the input parameters, its settings contain the Colors section, which is responsible for its color gamut and value thickness, as well as Levels, for adding additional signal levels to the indicator window.
- RSI period - value of the period of the RSI indicator. The default value is 14.
- Trend Envelopes deviation % - deviation from the standard value of the Trend Envelopes indicator, measured as a percentage. The default value is 20.0.
- RSI smoothing period - period for smoothing indicator values. The default value is 5.
- RSI smoothing average method - the type of moving average used in the calculation of the indicator. The default value is Exponential moving average.
Indicator signals
The method of using the Trend Envelopes RSI indicator is very similar to using the standard version of RSI, while it is greatly simplified, since there are additional lines in the indicator window, in addition, the indicator has become more effective due to the accuracy of the reproduced signals. To open a certain trade, it should be first determined the current trend using the location of the main line of the indicator relative to the signal level, the color and direction of the additional line and the color of the point formed at that moment. If an uptrend is detected, a buy trade is opened, and if the trend is down, a sell trade.
Signal for Buy trades:
- The main line of the indicator moves up and rises above level 0. At this moment, a dot and an additional color line with a growth value should form.
When a point appears on the chart, as well as all other conditions, a long position is opened on the signal candle due to the presence of an upward trend. Close such a position after another point with an additional line is formed in the indicator window, formed after the main line goes down below level 0. At this moment, a change in the current trend is possible, which will allow opening new positions.
Signal for Sell trades:
- The RSI line is below the level 0. An additional line is formed under the lines, colored in color with a fall value and having a dot at its base.
After the appearance of such conditions characterizing a downtrend, a sell trade can be opened on the signal candle. It should be closed after the appearance of reverse conditions, that is, when the location of the main line of the indicator relative to level 0 changes, as well as subsequent conditions. At this moment, it should be considered opening new trades driven by a change in trend.
Conclusion
Trend Envelopes RSI is a modification, that is, an improved version of the standard forex indicator. This version was not only simplified in the perception of visualization, but also the accuracy of the signals was increased, which generally affected the effectiveness of the indicator. For a complete acquisition of trading skills in general, as well as for a thorough studying the indicator, preliminary practice on a demo account is recommended.
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