THIS strategy hinges on using the Relative Strength Index (RSI) to alert you to over bought or over sold market conditions, where over bought and over sold situations signify a change in the trend. Typically, when the RSI (see guide on the right) rises above 70, the market is over bought, while a reading below 30 represents an over sold market. As a low-probability/high-reward setup, with luck it should eventually result in a big catch.
At point A on the graph below, the market has fallen to a point where it may be considered to be undervalued and may present an opportunity to buy.
At point B, the market has risen to the point where it may be overvalued and may present an opportunity to sell.
To take a long position
● RSI reading should be less than 30.
● An up-candle should form and close sending the RSI reading above 30.
● At that point, consider going long on the market price on the open of the next candle.
To take a short position
● RSI rating should be a value greater than 70.
● A down candle should form and close pushing the RSI rating to less than 70.
● At that point, consider going short on the market price on the open of the next candle.