Simple - Close and Reverse

The Simple - Close and Reverse strategy uses Relative Strength Index to identify and trade on small price movements in a sideways market.

The logic behind this strategy is very simple. Notice, however, that there is no Stop Loss. This means the strategy will perform well in sideways markets, but poorly when the market moves a lot/fast or begins to trend. It will automatically switch from long to short positions and therefore stay in the market a lot. Notice also the Maximum Exposure limit which prevents it from opening too many positions when markets are trending.

Indicator description: Relative Strength Index (RSI)
RSI is a price-following oscillator that ranges from 0-100. Basically, RSI is a momentum indicator which compares the relative size of an asset's recent gains to its recent losses and thereby seeks to determine if the asset is either overbought or oversold. An asset is commonly deemed to be overbought once the RSI goes above 0.70, whereas it is deemed oversold once the RSI reaches 30.

Strategy Description
This strategy seeks to capture small market movements on the 5 minute chart. By buying when the RSI is below 25 and selling when it is above 75. In addition to a 30 pip (300 points) Take Profit, the strategy uses Close and Reverse, which means using opposite direction signals to close all open positions and open a new position in the opposite direction.

The strategy is by default set to trade on USDCAD as these two currencies generally follow each other quite closely as the Canadian and US economies have a somewhat symbiotic relationship. The strategy often opens as many as 8-10 positions depending on your account size and chosen trade size. As opposed to only trading at the perfect high/low price the strategy spreads out trades before, on and after short term peaks/bottoms. Then when the price comes around as much as 80% of all trades ends up in positive territory. 

Herein also lies an inherent risk as the strategy will often run substantial unrealised losses, which requires margin collateral, but also can be a huge risk during market announcements such as the US non-farm payrolls.

Have more questions? Submit a request