› Envelopes and RSI (Relative Strength Index) Strategy - How It Works

Envelopes and RSI (Relative Strength Index) Strategy - How It Works

Trend-trading is always appreciated by professionals since it enables them to gather huge and stable profits chasing the market trends. The more effective a trend following technique is, the more profitable the spotted signals are. In this article, we would like to show you such a profitable technical strategy constituted of two famous indicators Envelopes and Relative Strength Index (RSI), allowing you to detect and profit from grand trending movements.

Overview of Envelopes and RSI Strategy



As you already know, a complete trending system is formed of at least one lagging and one leading indicators. The lagging beacon in this strategy is the Envelopes, while the Relative Strength Index works as a leading guide.

Moving Average Envelopes are highly proficient trend-seeking beacons consisting of two Simple Moving Averages that run alongside, one of which is shifted upward and another one is shifted downward. Compared with using only one SMA to identify trending conditions, trading with the Envelopes is much more beneficial because trends are highlighted more transparently, helping avoid choppy exposition.

Relative Strength Index, so-called RSI, is an effective momentum tracker invented by legendary trader J. Welles Wilder. It could not only tell traders about the reliability of the market trends but also where the trends are about to shift. In this system, the RSI’s responsibility is to confirm whether the signals detected by the Envelopes are worth trading or not, helping eliminate noisy opportunities.

What is Relative Strength Index


The relative strength index (RSI) is a technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The indicator should not be confused with relative strength.


The detailed setting of this strategy is as follows:
  • Envelopes are set of 14 days with a 0.1% deviation.
  • RSI is also established with a 14-day setting.


If you like this strategy, you might also be interested in this Force Index Binary Options Trading System

Having been tested over the last 14 months, the strategy so far exposes a win ratio of 81.54%. According to the testing result, this system works best on the 15-minute chart, and could be used on any financial instruments. There are about 15 – 20 signals indicated daily.

How to Use the Envelopes and RSI (relative strength index) to Trade Binary Options



Since all the necessary indicators are available in the Finmax’s advanced chart, you need only 30 seconds to set up the strategy. Right after installation, trading can be engaged.

A call opportunity is determined when the requirements below are met:
  • The Envelopes head upwards.
  • The RSI remains above the 50 level.


Envelopes and RSI (Relative Strength Index) Strategy - How It Works


Conversely, a put signal is ascertained when the following conditions are satisfied:
  • The Envelopes head downwards.
  • The RSI remains below the 50 level.


Envelopes and RSI (Relative Strength Index) Strategy - How It Works


Below are some important rules when trading with this strategy:
  • Only one position should be entered at a time.
  • The candle of confirmation must be fully close before any trading decisions are made.
  • The position’s expiration should be set four times larger than the trading time frame. For examples, you can set the finishing time to be one hour when trading on the 15-minute chart.


Pros and cons of the Envelopes and RSI Strategy



Pros


  • Highly flexible and easy-to-use.
  • Generates high-quality signals by strict entering terms.
  • Enables traders to benefit from long trends.


Cons


  • Requires a high level of patience.
  • Necessitates traders to monitor the trading platform.


Conclusion



The Envelopes & RSI themselves are highly effective trading indicators, and they are even more powerful when combined. With a good testing result as well as lots of benefits confirmed during the testing period, we highly suggest trying this technical system if you are a trend lover. Nevertheless, because there is nothing called “100% win ratio” in the binary options trading world, don’t forget to use risk controlling and psychology managing methods alongside.


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