#2. This trading method is quite similar to the way I used multi-timeframe RSI that I presented above. It only has one basic difference: how to determine the trend on a large time frame.
For the above method, we have determined the order entry trend by OVERBUY or OVERSELL signals, but now you can use any other technical tool to determine the order entry trend.
Let's continue with the USDCAD example. In this example, I will still assume the trading timeframe is H4 and the trend timeframe is D1.
Step 1: Determine the trend of frame D
If you use RSI to determine the trend as above, in this case you missed the opportunity because there was no OVERBUY signal on D1 => Missed the opportunity to find a SELL point on H4.
But if you already know about the wedge pattern, you can easily confirm that the USDCAD D1 trend is bearish since the rising wedge pattern is broken out.
After confirming that the D1 trend is downtrend, the next step is to find a SELL opportunity on the H4 frame.
Step 2: Find entry point on H4
What needs to be done becomes much simpler, which is to wait for the OVERBUY signal on H4 to SELL, as shown in the picture.
You see, using RSI (or any other tool) that is “backed” by a larger time frame trend, the probability of winning is much higher.
Waiting for a signal in the direction of the larger time frame trend will take more time, but it's WORTH it, right?
Next, you will learn how to USE RSI IN COMBINATION WITH OTHER TECHNICAL TOOLS!
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