Trading Signals:
Different signals are used in trending and ranging markets. The most important signals are taken from overbought and oversold levels, divergences and failure swings.
Use trailing buy- and sell-stops to time entry into trades.
Ranging Markets:
Set the Overbought level at 70 and Oversold at 30.
Go long when RSI falls below the 30 level and rises back above it or on a bullish divergence where the first trough is below 30.
Go short when RSI rises above the 70 level and falls back below it or on a bearish divergence where the first peak is above 70.
Trending Markets:
Only take signals in the direction of the trend.
Go long, in an up-trend, when RSI falls below 40 and rises back above it.
Go short, in a down-trend, when RSI rises above 60 and falls back below it.
Exit using a trend indicator.
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