Chart Pattern Breakout Trading Strategy Using RSI Indicators
There is a famous proverb in the forex industry which argues that history repeats itself and that this repetition can often lead to profitable trading forecasts. The price movement in the forex market always follows a specific price pattern. In the eyes of a trained forex professional, these specific price patterns create the most important parameter for trading in the financial markets. Range traders often prefer to trade forex pairs within the specific price movement that is offered on a daily or weekly basis, whereas trend traders tend to wait patiently for the breakout once the price forms specific patterns on the chart.
Technical analysis tends to work best when you are using reliable trading software. One of the best examples here is the MT4 forex trading platform at easyMarkets, which has shown some of the best success rates in the financial markets. These types of platforms offer superior efficiency and accuracy even in cases where markets are at their most vulnerable. With this in mind, let’s see how the professional traders use the channel RSI indicator to trade major breakouts in EURUSD.
Chart View: 30-Minute Chart in the EUR/USD:
Figure: Pattern breakout trading strategy using RSI indicator
In the above figure, the trader spotted a valid ascending channel in the EURUSD currency pair. The prevailing trend of the pair was bearish that why traders look for selling opportunity in the event of the break of the major support level of the channel. Once the price breaks the major support level, traders look at the value of RSI indicator. If the value of RSI is less than 50 traders open their short trade on the opening of the next candle after the breakout. Generally, traders use tight stop loss when using RSI breakout strategy since the price rarely retraces before the RSI gets oversold.
Most important chart pattern and historic price levels are used in this type of trading strategy. When the price moves in a confined region for the elongated period of time professional traders wait patiently for the price to breakout in the direction the trend. Statistically speaking most of the major breakout occurs in the event of a major economic news release. Therefore, the experts become overly cautious if the price trade near the major support or resistance level of a specific pattern before the economic news release. Economic news release acts as the major catalyst and drives the price to next support and resistance level.