RELATIVE STRENGTH INDEX
Build A Relative Strength Strategy
This indicator shows over bought and over sold features and will will use a default of 70 and 30 to build this example strategy.
1. After logging into your account, click the ‘Build a strategy’ button in the top right-hand corner.
2. Let us begin by creating a new strategy by clicking ‘Build a New Strategy’
3. Once in the build a strategy tab, give your strategy a name, add the symbol set you want to trade and the candle duration.
4. When you are ready to start defining your strategy click ‘Create’ at the bottom of the screen, this will take you to the strategy overview page.
5. Begin defining your strategy by selection ‘New Condition’ at the bottom of the screen. Our strategy builder allows you to build condition met statements.
6. Begin your statement by selecting ‘Indicator’, from there select ‘RSI’ Relative Strength Index.
*Relative strength index is a technical indicator that is used to indicate when a market is over-bought and oversold by measuring the velocity and magnitude of directional price movement. The markets standard for setting parameters is usually to have a 14-day period and have 70 to represent an overbought market and 30 to represent an oversold market. *
Other indicators available:
7. From here you will need to enter a period of your choice (this will indicate the number of candles you want to use, and the length of a candle will be defined on your strategy overview page). Let’s stick to market standard and use 14 to indicate the period.
8. Click ‘next’ and from there we will now need to do a ‘comparison’. Click the compari-son button and let’s start with and overbought market. Select ‘more than or equal to’, from here we need to enter our number we want to represent an overbought market, again let’s stick to market standards and enter 70. Select ‘action’ on the next page and then sell from there to finish your statement line.Other options include:
- Less than
- More Than
- More than or equal to
- Less than or equal to
- Crosses from above to below
- Crosses from below to above
- Increases by
- Decreases by
9. To set your parameters for your oversold market we follow the same path, start by se-lecting new condition, select your indicator and use RSI again, when you get to your comparison select ‘less than or equal to’, after this you need to enter your parameters for an oversold market, let’s use market standards again and select 30 this will then take us to our action page where we select ‘buy’.
10. Now that we have defined our statement lines, we now need to set our money man-agement. Once in ‘Manage Money’ the first line will be ‘Trade Amount’ which is what we use to set the size of each contract that will be booked when the condition of our statement line is met. In this example we want to book 1 CFD lot, which is equal to 100,000 notional (0.01 CFD lots is the minimum amount which equates to 1000 notion-al)
11. The next line is ‘Position Stop Loss’ this is the amount in pips that we are willing to lose on each trade. In this example we will use 20pips as our stop loss.
12. The next line ‘Strategy Stop Loss’ is what we use to set out how many times we are will-ing for the trade to make a loss. For example, if we want this strategy to lose a maxi-mum of 10 times, we will set out strategy stop loss at 10 x 20 = 200pips. If we set the stop loss at 20 pips, this means the strategy will only run once with 1 loss.
13. After setting these we then set our ‘Position Take Profit’. As on the stop loss this out-lines how much we want to make on each trade. For this example, we will use 40pips. The ‘Strategy Take Profit’ will set out how many times we want our strategy to make a profit. In this example we will also use 10 times, so 10 x 40 = 400pips. If we set the ‘Take Profit’ at 40 pips, this means the strategy will only run once with 1 profit.
14. At the bottom of the manage money screen we have a ‘Trailing Stop’ which will allow you to set a trailing stop loss which means that every time the market moves up by a number of pips you specify, it will set your new stop loss at this level. For this example, we are using 10pips which means that once the market moves 10pips up our stop loss will also move up by 10pips. After setting all of these click save at the bottom of the screen. Each of these will also give you an overall profit and loss on the left-hand side of the screen.
15. After completing our money management, you will be taken back to the strategy over-view page and your ‘Algorithm’ is ready to start using.
16. After completing our money management, we will be taken back to the strategy over-view page and your ‘Algorithm’ is ready to start using.
17. Before taking to the live markets we allow you to back test your strategy up to 10 years using ‘Back Test’ or specific dates if required, plus you can ‘Paper Test’ which will allow you to trade in live market conditions risk free.
18. This also gives you the equity graph as to where you were making and losing money, plus the individual historical trades that are also downloadable via CSV.
19. Set your trade live