Trading is easy, however, consistently profitable trading is where the difficulty lies. Traders since the beginning of time have tried to come up with a strategy that they could use in order to increase their win rates while minimizing their risk. In this article, we go over one of the ways in which you could do so. We discuss the different indicators, the settings used, and also go over the results. Read on to find out more.
There are 3 main indicators used in this trading setup, and each of these indicators has been explained below in detail.
The EMA is simply the exponential moving average of the stock’s closing price over a given number of trading sessions. It works in a very similar way to the SMA (Simple Moving Average), except it gives more priority to more recent data as this is considered to be more relevant than old data. The parameter that you have to enter for the EMA is the time period. Usually, traders only go long when the current price is above the EMA, and short when prices go below the EMA.
Average Directional Index
The ADX indicator is often called the ultimate trend indicator, as it helps traders to identify when prices are flowing strongly in one direction. It does this by using a moving average of a given number of bars and therefore helps to reduce the risk associated with trend-based strategies such as scalping. It is a line and gives a value between 0 and 100. The ADX gives the strength of a given trend irrespective of whether the trend is a bullish or bearish one. The higher this value, the stronger the trend.
The RSI is a momentum indicator that is used to analyse the stock and identify if it is overbought or oversold at any point in time. It does this by monitoring the magnitude of recent price changes. The RSI is presented as a number between 0 and 100, wherein a number below 20 represents an oversold stock (ripe for a long position) and a number above 80 represents an overbought stock (ripe for a short).
For this particular trading setup, a 200EMA was used to provide trend direction. EMAs were also added to the RSI and the ADX indicator.
A long position was taken whenever the price was above the 200EMA, the RSI shows that the security is in the overbought region, and the ADX crosses over the EMA line.
A short long position was taken whenever the price was below the 200EMA, the RSI shows that the security is in the oversold region, and the ADX crosses below the EMA line.
The risk-reward ratio was fixed at 1:2.
Results and Adjustments
After a scalping session over the course of 2 years worth of past data using the 1-hour BTCUSDT charts, the overall results were:
Profitability: 1057.38% net profit
Number of Trades: 189
% of trades profitable: 71.96%
Profit factor: 1.977
Some additional indicators and settings that could be added in order to increase the win rate and reduce the risk employed are:
- Different levels of leverage could be employed to boost the profitability and/or the win-rate associated with the strategy.
- The take-profit and stop-loss levels could be tweaked to further affect the percentages of trades that were profitable.
- Multiple take-profits or stop-losses could be added to change the profitability or the win rate.
There are several highly profitable trading strategies that you can use in order to trade the markets and profit, but there are few that are as highly effective as the one discussed above. By implementing it even in its current form, you can make significant profits. You can also tweak the settings and alter the parameters on your own, resulting in a higher win rate and/or profitability.
- Best RSI TRADINGVIEW Strategy – Profitable on ALL Pairs | FOREX CRYPTO & STOCKS – 79% WIN RATE – YouTube
- TradingView Indicator
- Settings Used in the Video
- Exponential Moving Average – Investopedia
- ADX: The Trend Strength Indicator – Investopedia
- Relative Strength Index – Investopedia