# 530# RSI divergence with Two SMA

Submit by Buddy 13/01/2014

RSI Divergence with Two SMA is a system is a trend follower , and it’s mainly designed to catch the long term trend movement and follow it until it

changes direction and start an opposite trend.

It’s also designed to keep traders away from the market if the

trend is too weak or there is no clear/strong trend direction.

What makes this system even more powerful is that it’s easy to

Best Time frame is 1 Hour Chart, the system can be used with all

currency pairs.

The system uses two main indicators to identify major trend’s

direction.

First indicator: Simple Moving Average ( 9 SMA and 200

SMA ).

How to read this indicator and identify the trend?

9 SMA ( Blue Line ) Above 200 SMA ( Red Line ) = Up

Trend

200 SMA ( Red Line ) Above 9 SMA ( Blue Line ) = Down

Trend

Second indicator used with this system is RSI Divergence

( Period : 21 ).

How to read this indicator and identify the trend ?

Red Bar Below 0 line, After Down Arrow = SELL Signal

Blue Bar Above 0 line, After Up Arrow = BUY Signal

USING BOTH INDICATORS…

1 - Down Trend Signal

2 - SELL Signal

Simple Moving Average = Down Trend Signal

RSI Divergence = Sell Signal

1 – Up Trend Signal

2 – SELL SignalSimple Moving Average = Up Trend

RSI Divergence Indicator = Buy Signal.

Playing with stop loss and profit taking is an art. It requires a bit

experience. So if you are new to trading, you can use the

following simple rules:

Place target profit to 30 pips. And set stop loss to be the same.

Get out of the trade when you reach target profit, or when you

see the reverse signals. For example, when you are in a buy

trade, get out when you see one of the two indicators change

color.

section describing how you can place targets & stop loss with

Fibonacci levels.

For targets and stop loss , we are going to use one of the most

extension levels to place Stop Loss and Target Profit.

The principle is: Once price breaks support or resistance, we

place Fibonacci levels over the last wave for that level.

The above example shows USD/CAD 1H chart, support was just

broken and we placed Fibonacci levels over the high and low of

price wave.

Our Stop loss would be the 0.0 level

And First Target would be the 161.8 level

Second Target would be 261.8 level

In the above example , the system generated a buy signal ( Up

trend ).

What we have done next is that we used Fibonacci levels to set

entry/targets and stop loss levels once 1H resistance was broken.

RSI Divergence with Two SMA
rsi Divergence with two SMA.rar
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