Power Trend Strategy

You know, the online trading platforms have really changed the game in trading. A lot of people have jumped into this world looking for quick cash, and a good number of them have actually done well. As traders, we work to buy or sell assets for profit, moving through all kinds of markets—stocks, bonds, derivatives, commodities, and forex. Some of us even choose a favorite asset class and go all in.

Here's the thing: I handle my own analysis too. Forget the old image of traders yelling orders on the trading floor; nowadays, it’s all about phones and computer screens. I’m glued to performance charts, tweaking my strategies, because let’s be real, making a profit usually comes down to timing it just right.

Let me share a slick strategy I like to call the “Power Trend.” This technique relies on the RSI, and trust me, it works like a charm for options across almost any trading platform. Consider the variety of strategic trading opportunities offered by PocketOption broker as we break it down and look at the market through this strategy's lens.

Setting Up Trading Tools for the Power Trend Strategy

As I said, the Power Trend system focuses on the RSI. The relative strength index (RSI) is a handy technical indicator that helps analyze financial markets by tracking the current and historical strength or weakness of an asset based on its closing prices over recent periods. Just don’t confuse it with relative strength, alright?

The Pocket Option terminal includes RSI as a standard trading tool. You can easily select it from the options menu to turn it on.

RSI appears as an oscillator—a line graph bouncing between two extremes. It can range from 0 to 100. This indicator was created by J. Welles Wilder Jr. in his 1978 book, “New Concepts in Technical Trading Systems.” Traditionally, values above 70 suggest overbought conditions, indicating potential price reversals, while a reading of 30 or lower suggests oversold conditions.

Now, here's the twist: I’m using RSI differently in the Power Trend Strategy.

Traders like me have noticed that the RSI follows price movements: in an uptrend, the RSI line moves up. The peaks of this line are key for interpreting market action.

To truly understand what the indicator’s readings are saying, I always pay attention to the overall trend of the asset. A well-known market expert, Constance Brown, CMT, teaches that an oversold RSI in an uptrend will usually read much higher than 30%, and an overbought reading in a downtrend will often stay below the 70% mark.

Trading with the Power Trend Strategy

When it comes to using overbought or oversold levels according to the trend, it’s crucial to focus on trading signals that align with the trend. Basically, I’m all about bullish signals in a bullish trend and bearish signals in a bearish one to avoid those annoying false signals that the RSI can produce.

• When the RSI breaks out from the bottom, I’m buying the CALL option.

• When the RSI breaks out from the top, I’m looking to buy the PUT option.

Expiration? That needs to match the formation of two candles.

I can work with any timeframe, and the RSI settings remain the same.

A bullish divergence occurs when the RSI shows an oversold reading followed by a higher low aligning with lower lows in the price. That’s a signal for rising bullish momentum, and breaking above oversold territory could set me up for a long position.

For a bearish divergence, it happens when the RSI shows an overbought reading, then forms a lower high that corresponds with higher highs on the price chart.

I identify a bullish divergence when the RSI displays higher lows while the price dives with lower lows. Yeah, it’s a solid signal, but you know, divergences can be rare in a steady long-term trend. Using those flexible oversold or overbought readings? That’ll help me catch more potential signals.