RSI Divergence Strategy with Fibonacci

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Strategy Overview
Indicators Used:

Relative Strength Index (RSI): This momentum oscillator measures the speed and change of price movements. It helps identify overbought or oversold conditions in the market.
Fibonacci Retracement Levels: These levels help identify potential support and resistance areas based on the Fibonacci sequence. You focus specifically on the 50% retracement level for your entries.
Entry Criteria:

Trendline Break with Divergence: The strategy involves identifying trendlines that have at least three touchpoints. A trendline break indicates a potential change in price direction.
RSI Confirmation: An entry is triggered when the RSI indicates an oversold condition (crossing above a certain level) for long trades, or an overbought condition (crossing below a certain level) for short trades.
Fibonacci Touch: A rejection candle wick must touch the 50% Fibonacci retracement level, confirming the trade setup.
Exit Criteria:

Risk-to-Reward Ratio: The strategy employs a 1:3 risk-to-reward ratio for exit points.
Multiple Exit Targets:
First Target: When the first target is hit, 50% of the position is closed, and the stop-loss is moved to breakeven.
Second Target: When the second target is reached, 25% of the remaining position is closed.
Third Target: The final target closes the remaining position.
Risk Management:

Stop-Loss Placement: Stop-loss orders are set according to the defined risk-to-reward ratio, utilizing the ATR (Average True Range) for volatility-based placement.
The stop-loss is adjusted to breakeven once the first target is hit, ensuring that no losses are incurred on the trade after that point.
Advantages of Your Strategy
Structured Approach: By combining RSI and Fibonacci retracement with clear entry and exit criteria, the strategy provides a well-defined trading plan.
Risk Management: The strategy emphasizes risk management by using a calculated approach to stop-loss and take-profit levels, helping to preserve capital.
Adaptability: The use of ATR allows for flexibility in trade execution based on market conditions, making the strategy adaptable to different volatility environments.
Potential Considerations
Market Conditions: The strategy may perform better in trending markets compared to sideways or choppy conditions. Backtesting in various market scenarios can help evaluate its robustness.
Divergence Detection: Implementing additional logic to detect divergences can enhance the entry criteria and improve the accuracy of the strategy.
Execution Timing: Consideration for the timing of entries and exits, such as during high volatility or news events, can further refine the strategy.
This strategy leverages both technical indicators and risk management principles, aiming to capture profitable trades while minimizing risk. Let me know if you need further insights or modifications!

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### Strategy Description: RSI Divergence with Trendline and Fibonacci Retracement

This trading strategy combines **RSI divergence**, **trendline analysis**, and **Fibonacci retracement levels** to identify high-probability trade setups in the market. Here’s a breakdown of each component and how they interact within the strategy:

#### 1. **RSI Divergence**
- **Relative Strength Index (RSI)** is used to measure the speed and change of price movements.
- **Divergence** occurs when the price makes a higher high (in an uptrend) while the RSI makes a lower high (bearish divergence), or when the price makes a lower low (in a downtrend) while the RSI makes a higher low (bullish divergence).
- The strategy specifically looks for divergence between the price and the RSI, indicating potential reversals.

#### 2. **Trendline Analysis**
- The strategy draws a trendline based on the last three significant high or low points identified through RSI divergence.
- A **trendline** is created when there are three touchpoints on the highs or lows, providing a visual representation of the support or resistance level.
- The entry condition is validated when the price breaks this trendline, signaling a potential change in the market direction.

#### 3. **Fibonacci Retracement**
- **Fibonacci levels** are calculated based on the price movement from the significant high to the significant low.
- The strategy focuses on the **50% Fibonacci retracement level** to identify areas where price may react.
- A confirmation candle is required to touch this Fibonacci level with a rejection wick, indicating strong buying or selling pressure.

#### 4. **Entry Conditions**
- A **long position** is initiated when:
- There is bullish divergence (lower low in price vs. higher low in RSI).
- The price breaks the trendline drawn from the previous three highs.
- The price touches the 50% Fibonacci retracement level and shows rejection (a small body candle with a large wick).
- RSI is below the oversold level (indicating potential reversal).

- A **short position** is initiated when:
- There is bearish divergence (higher high in price vs. lower high in RSI).
- The price breaks the trendline drawn from the previous three lows.
- The price touches the 50% Fibonacci retracement level and shows rejection (a small body candle with a large wick).
- RSI is above the overbought level (indicating potential reversal).

#### 5. **Risk Management**
- The strategy incorporates a **risk-to-reward ratio** of 1:3, with a **fixed stop-loss** of 250 points for each trade.
- There are three take-profit levels, each set to capture profits at different stages:
- **TP1**: 250 points
- **TP2**: 500 points
- **TP3**: 750 points

#### 6. **Compatibility**
- The strategy is designed to work effectively on **1-minute** and **5-minute** timeframes, making it suitable for scalping and short-term trading.

### Conclusion
This strategy aims to capitalize on market reversals by combining multiple technical analysis tools to create a robust trading framework. The reliance on divergence, trendlines, and Fibonacci retracement levels provides a comprehensive approach to entering and exiting trades while managing risk effectively. By focusing on precise entry and exit criteria, the strategy seeks to improve the probability of successful trades in volatile market conditions.