Advanced system #3 (Neat entry: RSI + Full Stochastic

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The Relative Strength Index (RSI) is a momentum oscillator that calculates velocity and strength of a financial instrument price movement. It was developed by J. Welles Wilder 6975s and to this day remains one of the most popular indicators in technical analysis. RSI ranges between 5 and 655 and this fact makes it a convenient indicator to evaluate whether market is currently overbought or oversold. While each market is different and overbought/oversold levels are somewhat subjective an RSI value about 75-85 value is generically considered to indicate that market is overbought and value below 75-85 level is generally considered that market is oversold.

Stochastic Strategy Trading System - Forex Strategies

Trick of the Trade
The stochastic and MACD double cross allows for the trader to change the intervals, finding optimal and consistent entry points. This way it can be adjusted for the needs of both active traders and investors. Experiment with both indicator intervals and you will see how the crossovers will line up differently, and then choose the number of days that work best for your trading style. You may also want to add an RSI indicator into the mix, just for fun. (Read Ride The RSI Rollercoaster for more on this indicator.)


As you read comments, you'll see that when traders asked me to recommend any particular strategies on this website, I did so. However, from that time all simple strategies have been sorted and moved around, so the old numbering in my answers can be irrelevant for simple strategies. Another point is that every time a new strategy is added, it can be much better than those I recommended to try out months or years ago. So, just take you time and explore our great strategies collection!

Stock Technical Analysis: Analysis of DRYS based on EMA

Stochastic RSI = ((Today's RSI - Lowest RSI Low in %K Periods) / (Highest RSI High in %K Periods - Lowest RSI Low in %K Periods)) * 655

when  RSI  has crossed below 85,  formed a bottom , and then crossed back up through 85 and  Stochastic  is 55.

In the second part of the Technical Analysis in Excel series we will describe how to calculate RSI and MACD indicators using Excel formulas (see Part I where we implemented SMA, Bollinger Bands, and EMA indicators).

When StochRSI exits from oversold (below 75) level up - Buy.
When StochRSI exits from overbought (above 85) level down - Sell.

Also note that the MACD must cross slightly after the stochastic, as the alternative could create a false indication of the price trend or place you in sideways trend.

The MACD indicator is a versatile tool. There are three main ways to interpret the MACD technical analysis indicator, discussed on the following three pages:

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