Traders Dynamic Index is a complete pullback trading system that gives trades in direction of the main trend of the markets. Trend Following or trend Trading is a strategy according to which trader should buy an asset when the price is in an uptrend and sell an asset when the price is in downtrend expecting price movements to continue.
This system consists of the Relative Strength Index, Moving Averages, and Bollinger bands. Let’s try to understand the working of the Traders Dynamic Index.
Traders Dynamic Index Overview
Traders Dynamic Index completely based on the Relative Strength Index.RSI measures the momentum or force of the price data. Since RSI is a banded Oscillator, the value of RSI cannot go above 100 and below 0.
If the price is in an uptrend, Rise starts moving above the 50 & if prices are in a downtrend, RSI moves below 50 Level. Further 68 & 32 Levels are added for filtering the wrong trading signals.
Traders should look for long trades only if RSI is above the 50 Level and short trades when RSI is below the 50 levels.
Traders Dynamic Index Explanation
Moving Average is a trend following indicator that smoothes out the data by creating a constantly updated average price. Instead of price, Moving average is applied to the Relative Strength index as a filter. Redline is the short term moving average and the Yellow line is a long term moving average.
When Short term moving average is above the long-term moving average, the direction of the trend is up. When short term moving average is below the long-term moving average, the direction of the trend is down.
If both of the Moving Averages are above the 50 levels then the trend is accelerating upside & if both of the moving averages are below the 50 levels then the trend is accelerating downside.
Further Bands are applied on the Long term moving average by calculating the standard deviation which measures the volatility. Traders should trade only when bands are wide open to ensure that there is sufficient volatility in the market.
Traders Dynamic – Buy conditions
- Rsi should move above 68
- Short term moving average should move above 50 level
- Short term moving average should give an upside crossover from the long term moving average.
- Hold the Trade till the time rsi is above 50 levels.
Traders Dynamic – Sell Signals
- Rsi should move above 68.
- Short term & long term moving average should move above 50 levels.
- Short term moving average should give a downside crossover from the long term moving average.
- Hold the trade till the time rsi is below 50 levels.