As a trader in Olymp Trade, which indicators have you used in your trading? Today, I’m going to teach you how to use a very popular indicator to trade effectively. It is how to open orders in Olymp Trade using RSI divergence.
The problem is when you use a certain indicator, you don’t really understand what it is telling you. From these “misunderstandings”, you still open orders according to your hunch. And so the transaction fails. When you’re wrong, you’ll have to find something to blame. The trading strategy or method is the first thing that comes to your mind.
This article will make you change that view. I will use the very simple and familiar things in Olymp Trade to demonstrate to you: “Trading success or failure is all up to you.”
Video on how to set up RSI indicators and identify resistance/support levels in Olymp Trade
Here is a video on how to set up RSI indicators and how to draw resistance/support levels for beginners. If you have already known it, you can ignore it.
What is the RSI indicator?
In technical analysis, RSI is an indicator that measures the relative strength of the market. In Olymp Trade, the RSI indicator consists of 3 main components: The overbought level (70), the oversold level (30), and the RSI which goes along these two levels.
The RSI indicator works as follows:
+ When RSI hits the overbought zone (70) of the market, the price will tend to decrease.
+ On the contrary, when RSI hits the oversold zone (30), the price tends to increase.
What is the RSI divergence in Olymp Trade?
This is the signal used in the Olymp Trade strategy that will be introduced in the next paragraph. So, I will repeat it to let you understand.
RSI divergence is the phenomenon of RSI acting against the price. Details are as follows:
+ The price creates 2 peaks of which the following peak is higher than the previous peak. However, RSI reports a downtrend. Then we have bearish RSI divergence. Following a bearish RSI divergence, prices are likely to decline in the future.
+ The price creates 2 troughs of which the following trough is lower than the previous trough. However, RSI reports an uptrend. Then we have bullish RSI divergence. Following a bullish RSI divergence, prices are likely to increase in the future.
Above is all knowledge to remember about RSI indicators in trading. If you want to learn more or do not know what the RSI indicator is, You can review this article: What is the RSI indicator?
How to trade effectively using RSI indicator combined with support and resistance
In this strategy, I will use the RSI divergence. As you can see, after the RSI diverges, there is a high probability that the price will reverse. What we still lack now is a warning signal of when a price reversal will take place. And coincidentally, the resistance/support levels do this very well.
Specifically, when the bullish RSI divergence occurs, the price will create 2 consecutive peaks. After creating 2 peaks, a support will appear. If the price breaks out of this support and goes down, there is an extremely high possibility that the price will plummet.
The same goes for a bearish RSI divergence. When the price makes 2 consecutive troughs, it will have to create a resistance between these two troughs. And when the price breaks out of this resistance to go up, there is an extremely high possibility that the price will rocket.
So, we will open a trend reversal order like this:
How to open an order in Olymp Trade when RSI diverges
+ Open an UP order as soon as the candlestick completes breaking out of the resistance, and at the same time, the bullish RSI divergence appears.
+ Open a DOWN order as soon as the candlestick completes breaking out of the support, and at the same time, the bearish RSI divergence appears.
This is how to open an order based on both technical analysis and price action. So the given signal is very reliable and safe. You should open FIXED TIME orders with a long expiration time. This will be the best way to trade in Olymp Trade following this strategy.
How to manage your capital with this Olymp Trade strategy using RSI indicator
The disadvantage of using RSI divergences is that you need to be patient waiting for trading signals. In a day, the RSI divergence appearance is not much. So you can prioritize 15-20% of your balance for each order of this strategy. Open only one order per day with a constant investment is a safe way of managing your account capital.
For example, I deposited $500 into Olymp Trade at the beginning of the week. I will open orders with a capital of $100 per day. So, my capital will be divided into 5 orders from Monday to Friday. If you open the orders correctly, the profit at the end of the week will not be small ($228 or 45.6% of your account balance).
This part is indispensable. It helps you manage your emotions to protect your achievements as well as your account. With the RSI indicator trading strategies, you need to keep in mind a few principles:
+ Only open orders when there are enough signals. Be aware that the RSI divergence does not occur much. And even when the RSI diverges, you need to make sure the price has to break out before you open your order. If you can’t find such signals for the whole day, turn off the computer and do nothing.
+ Do not open more than 1 order per day. Remember that less is better. You should only open orders when the odds of winning are so great that you are willing to risk your own money.
+ Limit or do not trade on the day in which prices are affected by the news. When there is news in the market, the price will only follow the news. The RSI will definitely not be correct anymore when news comes out. Let’s skip that day.
Practice some test orders with the Olymp Trade strategy using RSI divergences
Here are some orders I tested using this Olymp Trade strategy. Efficiency is very high with 3 wins out of 3 orders.
1st order: In the EUR/USD pair, a bearish RSI divergence appeared. The price broke out of the support and turned down. Opened a DOWN order with an expiration time of 20 minutes. I won.
2nd order: This was the EUR/JPY pair with a 5-minute candlestick time frame. The price again broke out of the support when RSI divergence appeared. Opened a DOWN order with an expiration time of 20 minutes. I won.
3rd order: In the GBP/USD pair, a bullish RSI divergence appeared. After the candlestick completed breaking out of the resistance, I opened an UP order with an expiration time of 20 minutes. I won.
Maybe, when you see the transaction pictures on that real account you will not believe it. And you probably won’t believe this Olymp Trade strategy either. Therefore, turn on your demo account and experience it for 2 weeks. If everything is good, come back here and let me know the result. I wish you successful transactions. Goodbye and see you again.