Before we consider RSI trading strategies, it’s worth beginning with the small definition of the RSI.
Questions that will lead you to winning trades
When a person comes to a market, he/she has a plenty of questions: how to start trading, how to open an account, which strategy to choose, what indicators to use and more. We are sure, you had the same questions or maybe you still have them. You can find the basic information for beginner traders here.
But have you ever thought about such vital questions as what type of trader you are, what timeframe suits you more, what market is right for you? No? But these are the first questions you should ask yourself and find an answer. Don’t you think that you can suffer losses because you don’t have a clear idea about your trading personality, your character, and your trading style?
We want to introduce you 4 important questions you should answer yourself to turn trading in your favor.
1. What type of trader am I?
Answering this question, think about your personal qualities.
If you are used to following rules, you can’t deal with psychological pressure, you don’t rely on your intuition, you are a system trader.
System trading is a rule-based trading. Such a trader has an accurate strategy. If all criteria are met, it’s time to open a trade. The trader doesn’t consider a market sentiment or a current situation in the market. If the systems gives a signal to buy, he/she will buy without doubts.
The main advantage of being a system trader is a possibility to spend less time in front of the screen. You can even create an automated system that will open and close positions for you. All you need to do is to set criteria of your trading. In addition, a system like that reduces your emotional involvement and makes trading less stressful for you.
However, a disadvantage is hidden here. Neither a system trader nor a system reacts to the market sentiment. Yet, crucial news may cause a great volatility and the strategy won’t work in this case.
If you rely on your intuition, if you prefer to consider the current situation, if you can easily adapt to market changes, you belong to another type of traders – a discretionary trader.
A discretionary trading is a decision-based trading. A discretionary trader has a trading strategy as well. But the difference is that he/she applies the strategy based on market conditions. Even if the trader sees that all criteria are met but there are factors that may affect the market moves, such trader may decide to adjust the trade or even stay out of the market.
The biggest advantage of being a discretionary trader is adaptability. He/she follows the market sentiment. However, you should be sure that you won’t change your decision after you made it and won’t second-guess. If you are self-confident, you are a discretionary trader.
2. What timeframe suits me?
Many traders ask us what timeframe is better for trading. However, there is no common answer for everybody.
Your lifestyle will play the major role.
If you are a dynamic person and love action, you should trade on small timeframes such as M15, M30 and H1. You will be able to get profit quickly BUT you should remember about risks. You will have to deal with a bigger amount of swings and drawdowns. If some swings don’t matter while trading on bigger timeframes, they will be crucial while trading on small timeframes. If you are ready for stress in return for quick money, small timeframes are for you.
However, if you prefer thinking and proving your ideas and don’t like stressing, bigger timeframes are for you. BUT here you should remember about the disadvantages. You will reduce the level of stress but will have to wait for a longer time until the market reaches your targets. Are you a patient person? If yes, then choose daily, weekly and monthly timeframes.
3. What market will give me a bigger profit?
Sometimes traders even don’t know what market will give them better opportunities. Do you know that markets differ by volatility? Do you know that there are markets where you can trade long-term trends and there are markets where it’s better to catch the short-term momentum to get profit?
If you trade only EUR/USD because you have heard somewhere that it’s the most popular pair and you are sure that’s this pair offers a stable profit, you may be fooled.
If you have a great profit trading EUR/USD, it’s okay, don’t change anything. However, if you lose, it’s time to think about other markets. Maybe oil with its high volatility is your key to success or AUD/JPY with long-term trends is your chance. Check trading instruments provided by FBS.
4. What type of analysis will give me more reliable information?
The market offers a huge amount of information that will help you make a profitable trading. However, it’s too complicated to catch everything… or maybe not?
Here your personality will play a leading role again.
Do you feel more comfortable reading news and checking economic data? The fundamental analysis is for you.
Do you believe in technical instruments, do you think that technical indicators are more trustworthy? The technical analysis is for you.
Are you sure that you can analyze a big amount of information? If you answered yes, you can use both types of analysis. But be sure you can cover the full amount of information and make right conclusions.
If you are still not sure, check the market analysis and find out what is more suitable for you.
Have you answered all these questions? If yes, it’s time to check whether you’ve found out your trading personality.
When a beginner trader is looking for information how to start trading with profit, he/she usually comes across an advice to follow a trend.
Have you ever noticed that political events affect markets even more than the economic data