45-55 RSI Band Trading Strategy -- with David Moadel
hello and welcome to looking at the markets with David Modell trading the
4555 RSI band that's an unusual sounding strategy but it might actually work I
cannot guarantee that it works there are no guarantees and trading okay all I
know is that it's something that might be worth testing out with demo or
virtual trading so feel free to check this out and if you need more help with
trading or investing I do offer coaching you can email me for the coaching at
David Modell at gmail.com let's take a look at trading view calm right now I've
got the AMD Advanced Micro Devices one day or daily candlestick chart up here
each of these candles represents one day of price action now I have not tested
out this strategy so again you know do it at your own risk okay so and feel
free to test it out on other timeframes as well one minute candles two minute
five-minute whatever you have but again use demo trading or virtual trading do
not use real money to test this out alright so the 4555 band what is that
well when you put on the RSI you can put it on the 14 period that's fine that's
default or standard that's the look-back period for the for the RSI on the
standard settings but what you can do is if you're here on trading view you can
go to the style and you can change from 70 and 30 the standard settings for over
bought and oversold you can change them to 55 and 45 that's really narrow only
10 between them right so you get this when you do that you end up with this
narrow band here okay it's really interesting this narrow band is usually
in the middle not always though okay sometimes it's kind of down here but
it's still a pretty narrow band all right and here's where it gets
interesting when a stock is trending upwards strongly and as you can see AMD
is stock on a daily candlestick chart at least during this time frame was just
strongly trending upwards maybe you want to buy the small pullbacks within an
uptrend not a terrible idea when something is
trending upwards just wait for a small to medium-sized dip and you can if you
want to you can get in there and buy it so the idea is to hope that it will
resume the uptrend which it did here ok so what you could do is you could look
at that band that 4555 RSI band it is in light light purple here ok and you can
wait until the RSI goes back into that band until it reaches that buy zone and
when it gets in there you can buy because that is a pullback now only do
that when it is an upward trend in the stock you don't want to do this if the
stock is just falling falling falling constantly ok day after day week after
week month after month falling that that's not what you do it you do it in
something that has a pretty strong uptrend and you can use a moving average
if you want to you could put a moving average up there let's say you could put
a 50 period moving average or a 20 period or even a 200 period moving
average if you want something that really has a long look-back period ok
but you might want to put a moving average up there and make sure that it
is slanted upwards from the lower left to the upper right ok so if you've got a
moving average up there and it's it starts low and then goes higher and
higher that should confirm an uptrend alright so make sure it's trending
upwards and then excuse me and then when you see the RSI which should be above
that band there because it is in an uptrend after all when you see the RSI
pull back to the buy zone that RSI 40 fifty-five RSI banned okay so it came
back to it here you can buy and then what happened afterwards while this does
not happen every time but if you had bought when it went into the into the
4555 band it did go up as you can see okay it went up now went back into the
band the RSI did you could buy again maybe
you can add to your position okay so if you had bought here and then it went up
a little bit and then maybe you bought some more here when it but when it went
back into the 4555 RSI band okay and then you would have done quite well it
went up and up and up as you can see up up in a way it does not always happen
like that okay so and you take profits using your own profit taking system ok
this system does not tell you when to get out it just tells you when to get in
alright so you probably want to have some sort of profit target decide
beforehand you know how much do I want out of this trade okay and there are
different ways to do it you could even use the RSI by the way maybe if you want
to decide that when the RSI after being in the 4555 band maybe you decide you
know when it goes up to 80 or something or or 70 if you want to be a little bit
safer like over here reach 70 but if you had held on for 80 it went up to 80 over
here and you would have done even better okay so that's up to you to decide when
to get out now let's say you got out let's see took profits around here
somewhere you would have done as you can see quite well it went up and up after
hitting that buy zone a couple of times what about a downtrend well you can use
it that way as well just be careful okay if you're gonna short sell stocks please
be careful because you can lose more money than you have in your account when
you short stocks okay so I only recommend that for people who have a
pretty decent amount of money and don't mind losing it because you know it's
it's risky or it's for advanced traders only if you want to use a long only
strategy that's totally fine but if you do choose to go shorts make
sure you're in a confirmed downtrend using a moving average slanting
downwards or whatever your system is okay and then if you have a confirmed
downtrend then let's say it goes below that 4555 band but then comes back up to
it you can go short if you want to or buy a put option however you want to go
short okay and then as you can see if you had done that here it continued the
downtrend alright so that is another possibility but for most people I
recommend more of an a long only strategy confirm the uptrend and then
when you get a small pullback and it comes back to that 4555 band you can buy
if it goes up no ahead of time where your profit target is if it comes back
to that again but the uptrend is still the overall uptrend is still intact
according to your moving average or whatever confirmation you use for the
uptrend pulls back to the 4555 band again you can buy and take your profits
when you decided beforehand to take your profits that's when you take them it's
not the type of thing where you want to just guess and go where your profit
target is have some sort of system or a plan beforehand that's really important
okay and I do help people put together a trading or investing plans so if you
need some or want some help with that I do offer coaching for the coaching you
can email me at David Modell at gmail.com I hope you gained something
from this idea about the 4555 RSI band it's a very interesting and unusual way
to use the RSI alright so I want to thank you for watching and listening be
careful respect your stop losses have an exit strategy and just be careful out
there alright thanks a lot I will talk to you
again soon