Forex Trading Strategy – Combining Exponential Moving Averages and Relative Strength Index

Forex Trading Strategy – combining Exponential Moving Averages and Relative Strength Index

You will learn about the following concepts

  • Indicators used with this strategy
  • Signals to be looking for
  • Entry point
  • Stop-loss
  • Profit target

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Traders, who do not have too much time for examining price charts, may find this simple strategy attractive. The time frame we will be using is 1 day, with the following indicators – a 5-period Exponential Moving Average (EMA), a 12-period EMA and the Relative Strength Index (RSI) with its period set to 21. This approach can be used with any currency pair. Let us take AUD/USD.

A trader will usually look for a long entry, when the 5-period EMA (white on the chart below) crosses the 12-period EMA (green on the chart below) from below to the upside, while the RSI reading is above the 50.00 level.

A trader will usually look for a short entry, when the 5-period EMA crosses the 12-period EMA from above to the downside, while the RSI reading is below the 50.00 level.

A trader will usually look to close his/her position, when the two exponential moving averages cross once again or the RSI moves again through the 50.00 level.

Below we provide an example of a long trade and a short trade, based on this strategy.

chart 2.0

If you have any questions or suggestions you are welcome to join our forum discussion about Combining Exponential Moving Averages and Relative Strength Index .
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