The RSI2 Daily Strategy Traded With The Position Trader EA Using H4 Timeframe Entries
At the bottom of this post you will find the set files for MT4 and MT5 that are featured in the video so you can test yourself.
Position Trader EA Available Here:
MT4 Version - https://www.mql5.com/en/market/product/113677
MT5 Version - https://www.mql5.com/en/market/product/115359
In this video there is an extract from a daily live room goes through the RSI2 strategy on the daily timeframe entering positions on H4 using the position trader EA.
This is a variation on the well known RSI2 strategy that was originally developed for stock index trading but has been adapted to the forex market and position trading methodology. This includes the testing process, results, like simulation testing and everything you need to know about this awesome strategy.
The basics of the strategy as executed by the EA are simple. We wait for the RSI2 on the daily timeframe to be in a stretched and extended condition above the 90 reading or below the 10 reading. This indicates the Forex pair (or any other instrument) has been pushing hard in one direction for more than a day and is likely due to have a pullback in price before the next push or it could be at the extremes before a reversal.
Once this condition is met we monitor the 4 hour timeframe and wait for the market to start a move in the opposite direction to the initial push. This is done using a simple 2 period moving average and when a candle opens one side and closes the other side of the SMA it signals the bulls or bears have taken control of price. This is our entry signal into the market.
The initial risk taken in the testing is 1% of the account over a distance of 1 ADR (average daily range) of the currency. There is an automatic exit if the trade goes into 1.5% drawdown and profit is taken when 0.5% gain is achieved. This is a short term scalp on daily movement but you can go for longer runs if required and testing has shown this is also profitable. In fact of the 2000+ permutation tests made on each curreny pair the majority of tests ended in profit regardless of the risk or reward perameters set, results obviusly varied which are shown in the video.
If price pushes a further 75% of the ADR of the currency against the position we took we enter another trade in an attempt to dollar cost average into the position as it's already proven to be extended. We then wait for either the trades to stop out at 1.5% drawdown or exit with our 0.5% profit on the position.
Here are some screenshots covered in the video that show the strategy portfolio performance over the 4 year backtest.
You can see the pairs listed below. AC = AUDCAD, EA = EURAUD etc.....
No Swiss Franc or Japanses Yen pairs are traded as they are too volatile and trend further and faster than major currency pairs. The AUDNZD pair is also exluded as it trends hard also and has proven in multiple backtests to be unreliable for mean reversion as covered in the video.
