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Chart set up

This strategy uses a combination of three indicators - the Parabolic SAR, Relative Strength Index (RSI) and Average Directional Index (ADX).

Be aware that this strategy will not help you form a view on the price direction. Rather, it will help verify a view that you have already formed by either looking at a higher time frame or from fundamental analysis.

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Set your indicators

First you need to set up your chart. Switch your charts to a 15 minute time frame and add the Parabolic SAR, ADX and RSI to your chart.

Next, set the indicators to the following parameters – click on each link for instructions on how to do this:

  • RSI: 28
  • ADX: 10 (ignore the D+ and D- lines completely for this strategy)
  • Parabolic SAR: Step = 0.02 and Maximum = 0.2

Prepare your chart

Once you have set your indicators, you need to add some lines to your chart that will help you interpret and act on the signals they give you:

  • Add two RSI lines, at the 66 and 34 levels.
  • Then add an ADX line, at the 20 level.

See the image below to see what your chart should now look like:

  1. 20 line on the ADX
  2. 66 line on the RSI
  3. 34 line on the RSI

In the next lesson we will look at different ways to prepare and enter your trade.

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