Simple Swing Trading Strategy with RSI(2)

11 December 2010
by Ryan Mallory

Recently, I opened up SharePlanner to guest postings, primarily on the weekend. Today I have an article from Hung Tran over at SwingDragon, who is also a regular contributor to the SharePlanner Chat-Room, providing lots of solid daily opinions and analysis on the market. His post below outlines a simple swing-trading strategy that he uses that is very adaptable for any trader to use. If you are also interested in having your articles posted on SharePlanner, just shoot me over an email using my contact page. 

In this article, I want to share with you all a simple swing trading strategy that I learned and customized to my own trading style. I have found this strategy to be quite accurate if executed correctly. Even though the potential reward might not be high but the time duration the trader has to hold the stock is very short to recognize profits and move on to the next trade. Another advantage is that stop loss can be placed right below the low of the entry day and therefore incur a very low risk entry.

This strategy combines the use of 3-4 technical indicators:

- RSI (2)
- Simple Moving Average (5)
- Simple Moving Average (10)
- Simple Moving Average (20)(optional)
Here are the rules for the entry:
- The stock in on a strong up trend (preferred to be above 200MA)
- The pullback candle either touches the MA(10) or slightly below it (between MA10 and MA20)
- The RSI(2) is below 10
=>Enter on the close of the day.
=>Exit at the end of the day the price moves above MA(5).
*Stop-loss placed  below the low of the day of the entry.
As you probably already see, this strategy captures quick profits therefore it is much more effective on wide range stocks, or requires large capital into each trade. Nonetheless, it is one of my favorite strategy by far. Let me know if you have any question.

 

Comments  

 
0 # Palo 2011-07-22 06:39
Hi,
this looks interesting. I have a question of stoploss. It's not clear for me to put SL under day of entry. As I see in some charts during testing strategy it's to close. Very often next day goes down below low of entry day.

Thanks,

Palo
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