Trading Strategies Series Part 6

Combo Supertrend along with RSI

Today we will be discussing how Combo SuperTrend along with RSI can help us trade accurate intraday trades with more efficiency.

Supertrend Indicator

- As the name suggests, ‘Supertrend’ is a trend-following indicator

-  The indicator is easy to use and gives an accurate reading about an ongoing trend.

- A ‘Supertrend’ also acts as a strong support or resistance and it also provides a trailing stop loss for the existing trade. In a ‘buy’ signal, any dip towards the indicator can also be used as a buying opportunity and vice versa

- Works well in a trending market

RSI 

- The relative strength index (RSI) is a momentum indicator

- Measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock

Indicator Settings

We will need three supertrend along with RSI

1. Supertrend(9,2)

2. Supertrend(10,3)

3. Supertrend(14,3)

4. RSI default 14 or 7

Candle Time Frame : 5 Min

Long Entry Strategy

-  RSI above 50

- All three supertrend giving buy indication on same candle or consecutive candles.

Refer below charts for Buy Strategy

Note : 

1. Between first & third buy signal there should not be gap of more than 7-9 candles. Lesser the difference more accurately it works

2. Do not initiate a buy if any of the three super indicator generates a sell signal in between.

Profit booking : 

Once the buy is completed, profit booking can be done on either of the following

1. 5 percent profits

2. RSI going above 80

3. Any of the super trend giving sell signal after buying.

Stop loss

1. 5 percent loss on investment or RSI going below 40 according to the risk appetite

Sell/Short Entry Strategy

- RSI below 50

- All three supertrend giving sell indication on same candle or consecutive candles.

Refer below charts for Sell Strategy

Note : 

1. Between first & third buy signal there should not be gap of more than 7-9 candles. Lesser the difference more accurately it works

2. Do not initiate sell if any of the three super indicator generates a buy signal in between.

Profit booking

Once shorted, profit booking can be done on either of the following

1. 5 percent profits

2. RSI going above 60

3. Any of the super trend giving buy signal after shorting.

Stop loss

1. 5 percent loss on investment or RSI going above 70 according to the risk appetite

Tips to improve learning

1. Back test on historic data and various other stocks.

2. In live market do the paper trading using this strategy.

3. Keep a written record of your trades with success & fail ratio

4. Practice! Practice! Practice! 

Hope this helps everyone in learning & at the same time earning. 

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