Using Stochastic RSI to trade Gold on shorter time frames
For the past 2 months I tested a scalping strategy using the Stoch RSI oscilator for
XAUUSD
.
Basically, it consisted in entering a position, short or long, whenever the Stoch RSI crossed the signal above (shorting) or bellow (long) the overbought /oversold zones with very tight SL, waiting until the Stoch RSI gave me a clear trend change signal.
I tried several time frames for Gold and found that 15m and 30m worked the best.
Bear in mind I tried this for stocks, Bitcoin and it didn't fit at all. Only with gold. And only with the stoch RSI, the RSI was almost useless.
At first this strategy was providing me good results. I had a hit rate of up to 85% on shorts and and 50% on longs. I tried several explanations for this and best one I found is a combination of the following two:
1) gold was in a macro slight downtrend and even in very short time frames, the probability of being right shorting was higher.
2) gold (and everything?) tends to come down more decisively than up so the oscillators pick a more clear trend shift.
3) my psychology was stronger shorting, somehow I seem to be more "afraid" when longing, perhaps because of point number 2).
I eventually 1) gave up longing gold 2) used less leverage to have less tight SL and the strategy seemed too good to be true. No one was mentioning this on ideas or chats and sometimes I felt like I had found some sort of cheat code. Fellow traders would write "it's going up" or "it's going down" and they were almost always wrong if the Stoch RSI didn't match.
However, suddenly i stopped having clear signals, the market completely changed. Stubbornly and because I wanted to test it, I stuck to it, but it never worked again (so far).
My conclusion is that for it to work, the price action needs to be in "oscillator" mode with gold trading sideways on 15/30 minute time frame with a range of more than 3-4$ between tops and bottoms. It's also wiser to follow the main trend and opting out on entering short or long positions against a main trend.
Also, it is very important to check
DXY
and
US10Y
in real time. (right now those two indicators are much more relevant to me than stoch RSI).
I know for many more experienced traders the above idea might seem very obvious or naive, but I'm learning every day and I though I'd share my experience.
Feel free to comment and happy trading to all.
XAUUSD
. Basically, it consisted in entering a position, short or long, whenever the Stoch RSI crossed the signal above (shorting) or bellow (long) the overbought /oversold zones with very tight SL, waiting until the Stoch RSI gave me a clear trend change signal.
I tried several time frames for Gold and found that 15m and 30m worked the best.
Bear in mind I tried this for stocks, Bitcoin and it didn't fit at all. Only with gold. And only with the stoch RSI, the RSI was almost useless.
At first this strategy was providing me good results. I had a hit rate of up to 85% on shorts and and 50% on longs. I tried several explanations for this and best one I found is a combination of the following two:
1) gold was in a macro slight downtrend and even in very short time frames, the probability of being right shorting was higher.
2) gold (and everything?) tends to come down more decisively than up so the oscillators pick a more clear trend shift.
3) my psychology was stronger shorting, somehow I seem to be more "afraid" when longing, perhaps because of point number 2).
I eventually 1) gave up longing gold 2) used less leverage to have less tight SL and the strategy seemed too good to be true. No one was mentioning this on ideas or chats and sometimes I felt like I had found some sort of cheat code. Fellow traders would write "it's going up" or "it's going down" and they were almost always wrong if the Stoch RSI didn't match.
However, suddenly i stopped having clear signals, the market completely changed. Stubbornly and because I wanted to test it, I stuck to it, but it never worked again (so far).
My conclusion is that for it to work, the price action needs to be in "oscillator" mode with gold trading sideways on 15/30 minute time frame with a range of more than 3-4$ between tops and bottoms. It's also wiser to follow the main trend and opting out on entering short or long positions against a main trend.
Also, it is very important to check
DXY
and
US10Y
in real time. (right now those two indicators are much more relevant to me than stoch RSI). I know for many more experienced traders the above idea might seem very obvious or naive, but I'm learning every day and I though I'd share my experience.
Feel free to comment and happy trading to all.