The advantage offered by trend-following indicators is the relatively high accuracy of signals compared with oscillators. However, these signals are generated with a delay. Because of this, strategies based on trend-following indicators perform worse in a quiet market. The compensating solution in this situation is to combine them with oscillators, which are used as a secondary price filter. Today we look at an example of a simple strategy for Quotex based on the Moving Average and RSI.
Information about indicators
Moving Average. This is a line indicator that showing the average price over a certain time interval of the chart. The MA curve smooths out minor price fluctuations, focusing on the prevailing trend direction. The averaging principle is the basic approach underlying majority of most modern technical analysis indicators. This strategy uses Triangular MA, which is characterised by maximum smoothness.
RSI. The Relative Strength Index is the No. 1 oscillator. It consists of 1 line that shows the current strength of the trend and the probability of a price reversal. It has two zones (overbought and oversold) which, when entered by the price, suggest the waning strength of the present trend and a price correction that is likely to happen soon. We offer a more detailed overview of this oscillator in a separate article on our website.
Setting up the chart and the indicators
We are looking at the basic approach to market analysis that uses trend-following indicators and oscillators. It can be implemented on different time frames, both on second charts and on minute charts. As part of our current review, we look at a strategy focused on 1-minute trading.
A step-by-step guide on preparing the platform in advance:
- choose any profitable asset in the Quotex trading terminal;
- switch to the candlestick mode of the chart and set it to the 15-second interval;
- add the Moving Average and RSI by adjusting their settings as instructed.
In Moving Average settings, select Triangular for type, 20 for period, any colour for fill. Do not change the period of the RSI oscillator (14), but move the boundaries, putting the oversold and overbought levels at 50% so that they actually merge into one line.
A trade is always opened in the direction of the trend after it reverses, right after a signal is produced by both TMA and RSI at one time.
Trading by the strategy:
- up— the TMA curve is broken through by an up candlestick (green), a signal confirmed by RSI transition to the overbought zone;
- down— the Moving Average line is broken down, a signal that occurs in the context of RSI transition to the oversold phase (below the 50% line).
One trade lasts for 1 minute or 4 candlesticks on the chart. If you have selected the interval of, for example, 30 or 60 seconds instead of 15, expiration should be proportionally increased. Up to 2–5 minutes.
For the convenience of market analysis, you can add the colour fill to RSI areas when setting up the indicators: green for overbought, red for oversold. It would also be reasonable to increase the size of the oscillator window and the vertical scale (by scrolling with the mouse in the right horizontal scale).
When a strategy is used for trading, the size of investment is key. This is where one should adhere to the basic rules for managing capital on their deposit. One is recommended against investing more than 5% of one’s current balance in one trade. The optimal trade size is less than 1% of the deposit.
Also, keep in mind that online trading involves a high level of risk. In addition, no strategy can guarantee a 100% positive result. This is why the trader should be especially careful when trading on a real deposit, prudently weighing up and down all the decisions they make.