Can you make money with the RSI and Bollinger Bands trading strategy? No not with RSI and
Bollinger bands separately, because I have already tested the Bollinger bands indicator
and the RSI trading strategy 100 times, they both had a profitable win rate. With a reward
to risk ratio of 1.5 to 1, Bollinger bands had a win rate of approximately 55 percent,
and the RSI had a win rate of approximately 49 percent. But what if we combine these two
trading indicators, will the win rate go up? Well, why don't we find out. In this video,
I'm going to test the Bollinger bands RSI trading strategy 100 times, to find its approximate
win rate. And subscribe to the Trading Rush Channel and ring that notification bell, because
we test many different indicators 100 times to see if they work or not, and you don't
want to miss that.
In the RSI strategy that had a profitable win rate, the long entry signals were taken,
when the RSI crosses above the 30 level. And short entry signals were taken when the RSI
line crosses below the 70 level.
In the Bollinger Bands strategy that also had a profitable win rate, buy entry signals
were taken, when a buy candlestick pattern is formed after price crossed below the lower
bollinger band. And sell signals were taken when a sell candlestick pattern is formed
after price crossed above the upper bollinger band. Furthermore, a 200 period moving average
was used to find the direction of the long term trend.
But when you combine these two trading strategies, things become a little bit different. In the
Bollinger Bands RSI strategy, a buy entry signal is at the first candle that closes
above the middle bollinger band, soon after RSI was over sold. RSI value below 30 is considered
to be over sold. Furthermore, a good portion of the candle has to close above the middle
bollinger band, a slight touch will be considered as invalid.
Similarly, a sell entry signal is at the first candle that closes below the middle bollinger
band, soon after RSI was over bought. RSI value above 70 is considered as over bought.
And, a good portion of the candle has to close below the middle bollinger band.
For example, in this long setup, the RSI went oversold, then the price made a move up. Your
entry is at the first candle that closes above the middle Bollinger band. You can set the
stoploss below the lower bollinger band.
In this short setup, the RSI went above 70, then price made a move down. Your entry is
at candle that closes below the middle bollinger band. Stoploss goes above the upper bollinger
band.
Now you might be thinking, what's the point of using the Bollinger bands with the RSI
indicator? Well, some people like to combine these two indicators to filter some of the
false signals. Remember, RSI on its own was a profitable strategy. So when you use it
with the bollinger bands, you are filtering some of the false signals that bollinger bands
gives in some conditions. Bollinger Bands on its own was also a profitable strategy,
but in the bollinger bands strategy video, we used it as a trend following indicator
with the help of a 200 period moving average. When you combine the bollinger bands with
the RSI indicator however, you cannot use the 200 period moving average to find the
trend direction, because this strategy doesn't give a lot of entry signals when used with
a 200 period moving average. In other words, Bollinger Bands RSI strategy, is a reversal
trading strategy.
We have tested most indicators on the Trading Rush channel in the direction of the trend,
and because of that, many indicators performed really well. Since Bollinger Bands RSI strategy
is not exactly a long term trend following strategy, will it perform any good after testing
100 times? Well, I tested it 100 times and here are the results.
Number 1. When we took 100 trades with the Bollinger bands strategy, the strategy was
successful in the long run, because we traded in the direction of the trend and took trades
at the end of a pullback. We also had a relatively smaller stoploss. When an entry signal according
to the bollinger bands strategy was wrong, the trade was lost quickly because the stoploss
that was set according to the bollinger bands strategy was small. But when price made a
decent move in our favor, the profit was booked with 1.5 times more than the potential loss.
RSI strategy on its own was also profitable, because the stoploss that was set according
to the RSI trading strategy was small and the reward risk ratio was good.
In the Bollinger Bands RSI strategy however, the stoploss is relatively bigger. So price
has to make a really good move for the trade to achieve a good reward risk ratio.
So in other words, the things that made the Bollinger Band and the RSI strategy profitable
on their own, are different in this strategy.
For example, in this buy setup, the entry according to the Bollinger Bands RSI strategy,
is at the first candle that closed above the middle Bollinger band, after RSI crossed above
the 30 level. Stoploss is below the lower Bollinger band.
Now, according to the RSI strategy, entry is right here when RSI line crossed above
30. As you can see, RSI combined with bollinger
bands strategy gives a late signal when compared to the signals RSI gives on its own. Late
entry is not a big problem if the trade is taken in the direction of the long term trend,
because price usually makes a big move in the direction of the trend. But as you already
know, Bollinger Bands RSI strategy is not a trend following strategy. If you try to
use the 200 period moving average, it won't give a lot of entry signals. and because of
this, the Bollinger Bands RSI strategy gives a lot of false signals. When the market was
moving sideways and was in a big range, the strategy was performing ok. But when market
started trending, and since this strategy doesn't filter false signals in a trend like
other strategies do, this trading strategy had a lot of losing trades in a row, when
compared to other strategies we have tested on this channel.
You can use your own way of setting the stoploss and profit target to improve this strategy.
Just remember that your results can be different if you use different entry and stoploss conditions.
So remember to backtest your trading strategy before using it in the liive markets. You
can use the Official Trading Rush App to do that. RSI when combined with the Bollinger
Bands like this, doesn't give a profitable win rate that you can make money with in the
long run.
In fact, after 100 trades, the profit graph in the Trading Rush app didn't go up. With
a reward risk ratio of 1.5 to 1, the win rate of the Bollinger Bands RSI strategy I got
in this backtest, was approximately 35 percent. This is one of the worst win rates we have
gotten so far. There are strategies on the Trading Rush Channel that gave approximate
win rates more than 55 percent. The profit graph also looks like a downtrend. At one
point, this strategy gave 11 false signals in a row. RSI and Bollinger Bands on their
own had better win rates than this.
That's all. Like the video if you liked it. Subscribe to the Trading Rush Channel and
ring that notification bell to see more strategies tested 100 times, after all, you don't want
to use a strategy that doesn't work. If you want to learn more about the bollinger bands
strategy, and how it gave a profitable win rate, check out the bollinger bands video
in the Trading Rush App, or on the Trading Rush Website. And check out other videos on
the Trading Rush Channel. Maybe Support the channel on Patreon and see in-depth trade
analysis of the trades I took in the live markets. Thanks a lot for watching.