Last week we decided to investigate buying when RSI signals an overbought market. Our task this week is to develop a strategy around the concept. A natural starting point is to buy when RSI = 70, the traditional barrier for an overbought market. The exit strategy carries an equally...

Forward testing is the concept where now that you have spent countless hours writing, developing and modifying a strategy, now it is time to deploy it. Deploy it using a demo account first. Why should I test it on a demo before going live? A few reasons. The best one is that most...

I mentioned in the last post that I trade trending forex pairs. EUR/USD fits this description well. It trends consistently, plus it is cheap to trade. The whole concept of RSI is to identify overbought or oversold points. It functions reasonably well in a ranging market. But one...

I mentioned in the introduction that I focus on trending currency markets. EUR/USD is a great pair to look at for two reasons: • It consistently trends • It is cheap to trade Why does EUR/USD trend? It is critical to understand the fundamental reasons for a strategy’s required market...

Last week’s article set the parameters for the RSI strategy. This week is the fun part where we sort through the results. The charts on this page do not include commissions, spreads or other trading costs unless otherwise noted. The first chart is the optimized version of the strategy on a...

This post is the first in a series on building a strategy entirely from scratch. We will discuss: - Identifying patterns that will form the basis of the strategy - Changing observations into a strategy - Testing the strategy concept on historical data - In what market conditions is my...