As we loved Awesome Oscillator in action, we proposed another trading strategy using this indicator, but accompanied with the RSI indicator this time. Let us check how powerful these two can be together and either such combo of the indicators will make our trading decisions more precise.
The combination of these two popular indicators believed to make the strategy applicable almost for any trader – it is simple to understand even for the beginners.
Let us check if it is really true.
The Relative Strength Index, or RSI, is again among the most popular indicators used by traders. The RSI provides information about the strength of the price movements and its popularity can be explained with the simplicity of this indicator’s interpretation.
The standard setting for the RSI is 14 periods, which means that the RSI evaluates the last 14 candles, however, as mentioned further, this setting along with other ones is a matter of change and adjustments according to your needs.
RSI shows the strength of the trend and the possibility of the trend reversals as well as overbought and oversold periods.
Awesome Oscillator is another great tool adored by traders.
It can be utilized in order to find the best entry point for the trade and as well as a trade filter, so you reduce the false buy or sell signals generated.
Awesome Oscillator is histogram consisting of slopes turning from red to green and vice versa.
As the entry signal, we will take the moment when the histogram’s slopes cross the zero level and change color according to the trade rules. *
The Basic principles are the same as with other histograms – the cross of the zero level up indicated the upcoming trend and the cross of the zero level down – the possible reversal to the downtrend.
* In the section called “Further Adjustments”, you can find our advices how the setting of the strategy can be modified further.
Feel free to try different modifications and compare the results.
Check this part in order to try all the settings and the way they can influence the strategy outcome.
Indicators: RSI (14), Awesome Oscillator (default settings).
Currency pair: Any.
Timeframe: 15 min and above (we use 1h timeframe)
Stop Loss/Take Profit: 15/30*
Buy Entry Rules:
Sell Entry Rules:
*We set the same number for the Stop Loss/Take Profit of every trade for this backtesting experiment (1:2 ratio), but if you want to set it manually, you should follow the next:
|Market||Training set||Forward testing|
|Bull||345 pips||135 pips|
|Bear||330 pips||120 pips|
|Flat||30 pips||-90 pips|
|Market||Training set||Forward testing|
|Bull||01/03/2011-23/06/2011||09/06/2010 – 10/08/2010|
|Flat||01/09/2016 – 08/02/2017||04/05/2015 – 12/06/2015|
*How long it took us to enter the 50 trades for the Training Set and 20 trades for the Forward Testing.
A Reminder: in order to save your valuable time and efforts, we have introduced the system of backtesting when you perform only 50 trades through 3 different types of market (Bullish, Bearish and Flat markets) and then again 20 trades through the given types of market, but during other periods.
Then with simple math calculations, we can make conclusions about effectiveness or irrelevance of the chosen strategy.
The full version of the theory of our backtesting experiments and how did we came up with the idea of such backtesting you can read here.
What can we say? The results has astonished us: probably, the strategy will not make the millionaire, but still with the GIVEN settings, it has shown quite satisfying results.
Through the Bullish and Bearish markets, it has shown the positive results.
Only at the Flat market it has ‘stumbled’ a little – however, it is hard to trade the trend strategies during the flat markets anyways, so the negative result was predictable and expected.
It is crucial to mention: it took a while to enter the described quantity of trades within the given trading entry set ups.
Although the strategy itself brought positive results within the Bull and Bear markets, such humble profits won’t matter a lot for the professional trader who perceives trading more than like a hobby.
Disclaimer: it is necessary to repeat again – we have brought up such experiment not for the sake of searching for the Holy Grail among the strategies, but to show you that with the superpower of backtesting you can achieve much more than without it.
We would love to show you that the Forex trading should be perceived more like a profound analysis than a lucky guess and endless fortune.
And the last important thing.
It would be great if you perceived our backtesting experiment as the sign that you shouldn’t believe blindly anything found on the Internet especially if you bet your real money on it. Try any information, test it, prove it and then use it within the real-time trading.
As “there is no limit to perfection”, you can always try to improve any of the received results.
What else you can try to adjust:
As you can see, backtesting is quite simple activity in case if you have the right backtesting tools.
The testing of this strategy was arranged in Forex Tester with the historical data that comes along with the program.
To check this (or any other) strategy’s performance you can download Forex Tester for free. In addition, you will receive 22 years of free historical data (easily downloadable straight from the software).
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