As part of our mentoring series, Today, I am going to share the RSI and EMA spike Catching strategy for Boom and Crash. For those who may not know what RSI and EMA are, RSI is relative strength index while EMA is the Exponential Moving Average.
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For the sake of clarity, I am purely a price action trader, but I also use indicator especially to come up with short term strategy that can assist newbies and struggling traders to get their footings in the Forex market before coming up with their own strategy.
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Table of Contents
The Spike Catching Strategy for Boom and Crash
What you need to know
Before looking at the spike catching strategy for Boom and Crash; it is pertinent that we establish some ground rules;
- Although this strategy can be used to trade any asset on Deriv, I strongly recommend you use it to trade only Boom and Crash
- This is a short term strategy; it’s important you study and understand price action as it is the basic thing that will make you a successful trader
- This strategy is not the holy grail for trading, but it will enhance your profitability in the Forex market if you used in effectively.
- Always risk responsible; this is very important
- Like I always mentioned, if you are new to Boom and Crash, learn to Catch spike and you will enjoy the market.
The Indicators
Two indicators are needed for this strategy: The Relative Strength Index (RSI) and the Exponential Moving Average (period 1 to 4) and EMA 200.
The Settings
1. Relative Strength Index (RSI)
The first Indicator you need to add to your Indicator window one is the Relative Strength Index (RSI) period 1000 apply to close; level 85 and 10.
Set the RSI style to blue as seen in the image above, the blue line will act as your wait or Take profit point while using the strategy.
2. Exponential Moving Average
Add Exponential moving average 1 to 4 on your Indicator window one (that is where you have the RSI); shift 0, apply to weighted close; and use different colors for the 4 EMA. ( add all the indicators one by one from 1 to 4)
3. Exponential Moving Average (200)
Add exponential moving average 200 to your main chart, shift 0 and apply to close. This will be used to spot the trend and it can also serve as a determinant to guide you in spotting the support and resistance point on the chart.
How to Use the Spike Catching Strategy for Boom and Crash
- After deciding the trend of the market from H4 or H1, switch to M1 for entry positions
- Buy Boom when all the 4 EMA touches RSI level 10 and Sell Crash when all the 4 EMA touches RSI level 85
- Use the Blue RSI line as your take profit.
- Use small lot size and be sure to minimize your risk if there is a violation of market structure or trend reversal.
- Note, the spike might not come immediately, sometimes it can take up to 4 minutes.
- Try the strategy on your demo before switching to your main account.
- I have tested the strategy and the success rate is almost 95%.
Final Thought
Always remember to confirm the trend of the market before placing any trade. Trading is risky, but trading against the trend is very risky. If you have any question, be sure to share it below.
Disclaimer
Deriv offers complex derivatives, such as options and contracts for difference (“CFDs”). These products may not be suitable for all clients, and trading them puts you at risk. Please make sure that you understand the following risks before trading Deriv products: a) you may lose some or all of the money you invest in the trade, b) if your trade involves currency conversion, exchange rates will affect your profit and loss. You should never trade with borrowed money or with money that you cannot afford to lose.