Trading Examples Vol. 1 Pie WWW. YOULEARNFOREX.COMRSI PRO FOREX TRADING SYSTEM. Trading Examples The purpose this book is simply to help traders using the RSI PRO Forex Trading System to improve by seeing different currency trades and expanding their vision and understanding. | don’t plan to write at length here as the important information is in what follows. There are 40 trading exercises which were actual trades that were taken from February 2009 up until July 2010. At the end of the this book are 10 Trading Exercises that will lead your through some of the basic concepts that should came to mind whenever you place 2 trade. Each Trading Exercise has an answer and they are the type of exercises that you can continue on your own learned a great deal myself going over each of these trades and writing the step-by-step comments and explanations. | think that if you use this as a resources, referring to it often it will help you become a better Forex trader. ‘The most important thing that a Forex trader can develop is his or her decision-making process. Many times we enter trades and realize that we failed to think about something. By spending time understanding how to think we become more aware of our surroundings and we begin to perform at a higher level. Each Trade Example is numbered and titled. You may start from the beginning or scroll through the pages stopping where ever you like to read about the thinking behind a trade. I hope you enjoy the book and recommend the RSI PRO Forex Trading System ta your friends. Paul © wwwyoulearnforex.com Page 2Example d - Range Shift and Context This is an example of a Range Shift. A shift in the range of RSI. Depending on the time frame and currency pair, RSI will range between a higher set of number on uptrends(example: 40 to 80 RSI) and a lower set of numbers on downtrends (example: 60 to 20). A Range Shift when you see RSI move from a low RSI as shown here with the first red arr 20 RSI and then move steadily up to 80, as shown here, and then remain in the upper range. Although prices have moved sideways after the Range Shift in this example, the RSI has stayed in its range giving us the expectation that prices would continue up. This is not a signal to enter however. On the lower picture we see that there were 5 Range Shifts Ce which could be considered nsalidation or oscillation. Notice however, as RSI settle into a range of mostly 40 to 80 with some drops to 30. The box outlines where after the last shift RSI stabilized and then prices began to move up, eventually 900 pips. As a trader you should continually look at RSI zoomed out so that you can see hings in context.Exaiipla 2 ~ Reading RSI Signals and Momentum nd se I RS| Negative Reversals es have been moving up and RSI has been above low circle. Prices move up steadily ‘These are Momentum Type J (\V1) type signals because pri 40 RSI. Typically divergences are M1 type signals but in uptrends Negative Reversals can also fall into that category. ppear. 4 up because Momentum Type 3 (M3) is moving up with more force than e signal has more weight but even then consideration must be given to the Mi Type momentum signals sho price. Once RSI gets to 80 RSI th: current trading conditions and market dit ction ie. Main Channel of the trend. Any of the Negative Reversal or Divergence signals that appeared in this trade could have been exit points or places where position size could be reduced or added to. This will depend on the traders trading style The red circle shows a Positive Reversal at a RSI above 40. This would be good re-entry if the trade had been completely exited depending on the time of day and the trading style of the trader. As prices are sliding sideways after the two PR signals this ‘obably an indication that the trading was at the end of the New York trading session. © wwwyoule Page 4Example 3 - How RS! Shifts Range; 2 Stair Step Step 4: RSI hits 2 low at 20 RSI, this could be a buy but at this point itis uncertain, Step 2: Price has moved slightly but as the p Negative Reversal to follow or another Positive Divergence. A 2 period PD appears but RSI creates around 35 RSI. jous signal was a Positive Divergence we would expect a Step 3: We get enter and price drops but RSI makes a valley at 40 RSI. We v are going up, not going down, So we exit with 2 small gain. vo NRs at SO and then 55, With the previous trend being down we would enter here. We ld have liked to see if fall lower. Step 1, 2and 3 Step 4 Price and RSI move up, RSI to 75. W tum down stronger than are more tious here as price momentum up © wwwyoulearStep 5: Again RSI is supported and stopped at 40 RSI. RSI rises to 75 and another NR forms. We get a sideways eral NDs that drive the RSI to above 40 again with a PR above 40 RSI. This is an excellent entry to the pside. Example - Range Shi Perr ee wit em Rone ea ORNS a aaa ole This chart looks complicated but go through it carefully (several times if necessary) because it can give you a strong indication of what is to come when it haf Anytime pr itching for Range Shifts up, and when price is trending up the trader should look for Range Shifts down. The shorter the time frame traded the more often this will happen. is trending down the trader should bs Here the thin red arrow shows that price was heading down severely. Now look at the two yellow circles. The below RSI 20. That may or may not indicate that price is headed up but with the severity of the drop in prices we might not have thought that to be true. This is where patience is important. earlie Certainly you could have entered at the two PRs in the yellow circle however, you might have decided to wait until you were more certain and the range was established. Notice the second yellow circle goes all the way to 80 RSI. A continued downtrend would have slowed near 50 RSI. This is a Range Shift possibility at this point. © wwwyoule:What confirms it? The RSI drop after the circle only drops slightly below 40 RSI and then maintains that level, into the area of the yellow box and it stays above 40 RSI with PRs from April until November with plenty of exits and re-entry areas. Prices continued up until the last week of December. As price moved up we would have looked for 2 Range Shift down, until then we were looking for uptren trades. © wwwyoulearnforex.comExample 5 - Using RSI for Short-Term or Scalping and Minor Drawdowns Paves croee CE aoe RsI rar aN id eres eee galacant re several key things to point out here. 1. RSI PRO can be used to trade any time frame. This is the EURUSD M5 (5 minute) be seen the market is moving up and down with respect to the signals i.e. Positive and Negative eversals, 3. Previous to the last down move price moved up with at a Positive Reversal with almost no drawdown and nowhere near the standard drawdown location. 4. The green line on price is drawn for two reasons: here which could be attributed to the price where the previous a. The first is that price pau: low had been or there were blocks of trades that needed to be unloaded before prices could continue their fal b. Anew R was formed at that point and it wauld have been @ good place to exit and take partial 5. Because of the short time frame itis quite likely that price would have icted to the upswing of the PR. Some of that might have been left to the overall direction of the market at the time, the time of day and the condition of -conomy. © wwwyoule:Example 6 - Tight Drawdown ec (13 pips) This is a place and hold trade. These trad the trader has a high level of certainty that Why? a. A Negative Divergence signals a Positive Reversal at a fairly high I b. The Main Channel Trend is and has been up. 2. Tight drawdown means that position size can be increased. 3. The trade is placed at the Positive Reversal Point 1. No yellow line is where the entry would have been af based on a 10% drawdown which is based on the location of the Positive Reversal’s ABC point. 4. Point 2 and 3 with arrows are showing where price was when RSI created a strong V on RSI (red circle). hold their position for longer perhaps anticipated yet trade is going to move in the direction of the si nal, vel, 30 RS tice the two horizontal lines (yellow). The top the confirmation. The second is the stop lass area Even though price had stayed on the horizontal, RSI was moving up. These are all positive signs that the trade was going to move up. 5. Point 4is wl price took the largest jump (175 pip trad:Example 7 - Short-Term Trade M5 Below the Last Low Na) See RSI Tip #1. - PR ed eae ie fi Eat ee Ue ae CO eo 1) a ee rear RSI Paint indicator eB acer] ary up is the red dashed line indicating th st low on price. Price moves along that line until the Positive Reversal that occurs after a significant penetration of the line (red arrow). The confirming bar on the Positive Reversal was weak in comparison to the Valley Bar and there would be some question as to whether the penetration was going to take prices lower. If the trade spread would be that pri +t back to the support level and perhaps penetrate kind of trade two other considerations could be taken. tered at the signal, the stop could be anywhere from t! us 1 t as our expectation e would at least it. However, in this e low ‘onfirmation or Valley bar. 1. Take atigt 2. Wait until pric op a point o reaks through the Last Low line and then enter. We could exit at either of the Negative Reversals or wait for RSI to break a channel trend line (green dashed line) drawn from the signal through the first “V” formation on RSI. As long as RSI was climbing we are in the trade. When RSI falls through the channel trend line we exit, This is the case for short term trades but not true for longer term trades. © wwwyoulear