Trading with RSI Divergence

Setting:
>> TF=5 mins
>> RSI=2 periods
>> Wait for bullish or bearish candles
>> Entry at middle of candle
>> Target of 2% and 4%...SL at 2%...with 5times exposure margin

I randomly saw that RSI divergence gives a very good setup for intraday trades. We cud easily get 1 or 2 signals a day, with an expectation of 2 to 4% gains with 5 times margins.

Have a look at the pictures and post ur experiences if u have already traded or trading these kinds of setups.

Request AFL gurus to post AFL for this setup along with Back-tested results...

Open for further discussions and modifications....so that it benefits all here

I browsed for 3 months data in DLF...barring couple of occasions, most of the time it gets the target.

Look at DLF picture of today with 1 long and 1 short trade






NF of today (I traded this and got out with 11 pts gain)

thanks sir what a nice though but will u tell me that what time frame is best for 2 days r.s.i

I tracked couple of stocks today and traded HDFC short after finding the RSI divergence...hurray it was a winner

Have a look at the charts

Wud be helpful to all if someone codes AFL and backtests this strategy

RSI(2,E,0) .. I can't understand this parameter. E is exponential average, ok. What is 2 and what is 0 ?? Which one is Average Period and which is RSI period?

When I try to plot this on trade tiger, I get a flat line if any value is zero.

It is RSI 2 periods....leave that E and 0 part

The problem is that my software requires me to define these parameters. I can't leave any value as zero.

just check with ur software..it may not ask for E and 0

to clarify more, E is nothig but Exponential mov avg of RSI itself ...and 0 is the period of that mov avg

Sigh.. not my luck.. my software doesn't accept zero in average period my bad luck

Good..................................................

Divergence is more clear when we use a line chart and a higher period on rsi. Idea here is we are looking a change in momentum when a new pivot is formed with lesser momentum that the previous pivot. Most people forget that we are comparing pivots on price with corresponding momentum measurement on rsi not the other way round. If we see a lower peak on rsi and see price making a higher peak, we assume its a divergence. Price pivot has to be valid. Most occasions we dont even have a lower pivot on price and people assume we have a divergence in place.

Its more of a exit signal than a entry signal. When we have a strong trend in place you'll get plenty of divergence signals and you'll end fighting the market whole day.

along with divergence on rsi we look for lower volumes as that is a good signal of a maturing trend. Most of the time a pause is mistaken for a reversal on price and if you dont gain early entry, then chances are your stop loss will hit...!