In the video, the presenter introduces a new version of the Relative Strength Index (RSI) that is designed for trend-following strategies. This new RSI, called Ultimate RSI, is adjusted to emphasize trends and reduce noise compared to the traditional RSI. The presenter demonstrates how to add this new RSI to a chart and adjust its settings.
The presenter then introduces a trading strategy based on this new RSI. This strategy involves using two additional indicators: the MACD (Moving Average Convergence Divergence) and the ADX (Average Directional Index). The MACD is used to identify the overall market trend, while the ADX is used to confirm when the market is trending.
The presenter explains the strategy in detail, showing how to use the Ultimate RSI, MACD, and ADX to identify potential buy and sell signals. The strategy involves entering a trade when the RSI line crosses the 20 or 80 level, the MACD histogram is in the opposite color of the trend, and the ADX line is above 20. The presenter emphasizes that while this strategy is highly accurate, it is not foolproof and traders should always manage their risk properly.
The presenter concludes by encouraging viewers to subscribe to their channel and recommends a risk management strategy called the "one percent roll".
1. The video is about a new version of the Relative Strength Index (RSI) that performs well and is used to teach a trading strategy.
2. The new RSI is designed to reduce noise and emphasize trends, unlike the original RSI which is commonly used for identifying overbought or oversold conditions and price reversal.
3. The new RSI is built based on the calculation of the old RSI's relative strength index and is adjusted to have less noise compared to the old one.
4. The new RSI is designed for trend-following strategies, giving the opportunity to enter a trade in the current direction of the market.
5. The new RSI has two lines fluctuating above and below a center line, which changes color between white, green, and red.
6. The settings of the RSI indicator can be adjusted. By default, the method is set at RMA, but it can be set at TMA (triangular moving average), which is smoother and less reactive to price changes.
7. In this strategy, the RSI line going above 80 indicates a strong uptrend, and going below 20 indicates a strong downtrend.
8. The MACD (Moving Average Convergence Divergence) and ADX (Average Directional Index) indicators are added to the chart for the trading strategy.
9. The MACD settings are adjusted, with the fast length set at 100, the slow length set at 200, and Signal smoothing set at 50.
10. The ADX is used to know when the market is not trending. When the ADX line is below 20, it shows that the market is not trending.
11. In the trading strategy, the new RSI is used to discover when the price is moving strongly. When the RSI line goes below 20, it shows a strong downtrend.
12. The strategy requires two confirmations: the MACD histogram should be read and the ADX line should be above 20.
13. The stop loss for the trade is placed above the previous swing high for a short position, and below the previous swing low for a long position.
14. The strategy has a high degree of accuracy, but it doesn't mean it will not generate false signals.
15. The video recommends a risk management strategy called the one percent roll, which is one of the best ways to protect your trading account.