RSI vs BB Indicator For MT4
Table Of Contents:
- RSI vs BB Indicator For MT4
- Oversold and overbought market
- Riding a newly formed bearish trend
- Tight stop vs wide stop
- Dealing with the losing trades
- Trade the major pairs only
- Learn from the experienced traders
Executing trades based on RSI vs BB Indicator For MT4 is a very powerful way to secure quality trades. The indicator is formed on the principle of RSI and Bollinger band. The upper band ( red color curve ) acts as dynamics resistance and the lower band ( green color curve) acts as critical support. But if you analyze your trading chart, you will also find red and blue dots right after a surge in a price break. This reading of the RSI vs BB Indicator For MT4 indicators temporary breakout of the price.
Those who are skilled can take advantage of the RSI vs BB Indicator For MT4 in a great way. Some of the intermediate traders might think they will trade the breakout after the formation of the red or blue circle above the upper or lower band of the RSI vs BB Indicator For MT4. But the professional traders use the red and blue dot in a completely different way. Before we dig deep, we need to give you a clear idea about the oversold and overbought condition of the market.
Oversold and overbought market
A market is said to be oversold when the price falls below the expected region. Most of the time, the price of the asset starts to rise higher after it hits a significant low. On the contrary, the overbought condition of a certain asset is defined by the sharp rally in price without any major bearish retracement. You can expect a decent fall in an overbought market. Finding these two major condition of the market by using the RSI vs BB Indicator For MT4 is easy. Just look for the red and blue dot. Some of you might think the blue and red dot suggest to trade in favor of the breakout. But you have to understand the fact, this is a temporary breakout and it indicates a prominent reversal in price pattern.
Riding a newly formed bearish trend
Learning the proper use of RSI vs BB Indicator For MT4 is very hard by reading the generic text. To make things easier, we will represent a short trade set and highlight the key parameters used to assess the quality of the trade setup. Before you start analyzing chart based on RSI vs BB Indicator For MT4, remember the fact, breakout term is used in a completely different way. If you spot a bullish fake breakout, you can expect the bearish run. Let’s see a real trade example.
Figure: Short trade setup using RSI vs BB Indicator For MT4
Look at the price chart and you will understand the role of the upper and lower band. Most of the time the price respect these bands and allow the professional traders to execute quality trades. Let’s clarify the above trade setup so that you learn the proper way to use the RSI vs BB Indicator For MT4. If you notice at the upper band, you will find a clear bullish break right above the upper band. Right after the bullish break, the RSI vs BB Indicator For MT4 prints a red dot which indicators, the breakout temporary and the price is most like to dive deep. After few candlesticks, you can see a nice bearish pin bar (marked with a square region) at the dynamic resistance level of the indicator. This is the clear indication which suggests, a sharp fall in the price. This the pro traders went short and make a decent profit by riding the bearish rally.
Tight stop vs wide stop
When you use the RSI vs BB Indicator For MT4, you can either use tight stop or use wide stop loss to improve your win rate. If you trade the daily chart (just like the above illustration), set the stops just above or below the green or blue dot of the indicator. Such stop loss should be used by the rookie traders since you will not get stopped on small market noise. On the contrary, you can also use a tight stop by using the candlestick signal. To do so, you must have proper knowledge of price action strategy. And make sure you are not taking too much risk. If necessary, use a practice trading account and try to develop your trading skills.
Dealing with the losing trades
Those who are using the RSI vs BB Indicator For MT4 might get carried away by seeing the success rate. But no trading strategy in this world is perfect. No matter how hard you try, you are bound to lose some trades regularly. You must have the ability to deal with the losing trades in a smart way. Never make things overly complex since trading has nothing to do with the complicated market condition. Embrace the losing orders and wait for the next trade. Since you will be focusing on the bigger time frame, it might take some time. So, develop your patience level and keep things organized.
Trade the major pairs only
The trading strategy related to the use of RSI vs BB Indicator For MT4 is based on breakout pattern, overbought and oversold condition of the market. To get the best possible result, you must trade the major pairs only. If you intend to trade the cross pair, you will have to deal with many losing trades. A false breakout is much more prominent in cross currency pairs. The price movement of the financial instrument is not that stable. Unless you trade a stable market, it’s tough to make a consistent profit.
Learn from the experienced traders
As a new trader, you can also learn the proper use of RSI vs BB Indicator For MT4 from the experienced traders. The experienced traders can give you a clear guideline and help you to create a perfect trading system. However, finding an experienced professional is not so easy since 95% of the retail traders are losing money. In such a case, you can always use a demo account and test different trading strategy to make things easier in trading.