RSI(21) + Ignition Candle on US30 — Strategy Idea

TL;DR: Trade US30 in the first 2 hours of NYSE. Use RSI (period = 21) as a directional filter; when RSI closes above 50 (bias Long) or below 50 (bias Short) and an ignition candle forms, enter on a breakout at High + 3 points (Long) or Low − 3 points (Short). Place SL approximately ignition ±3 points. Target minimum R:R = 1:2; optionally scale out or trail.

1. Introduction

A short-term intraday concept combining a directional filter (RSI 21 midline) with a momentum trigger (ignition candle). Designed for traders who prefer clear, rule-based entries focused on opening momentum in US30.

2. Strategy overview

• Instrument: US30 (Dow Jones CFD or futures)
• Primary timeframe: M1 (optionally M3)
• Session: First 2 hours of NYSE
• Indicators: RSI(21) and optional tick/volume indicator
• Core idea: RSI defines bias; a recently closed “ignition” candle is used as the entry reference and SL anchor.

3. Setup

• Chart: use M1 as primary; add M3 for context if available.
• RSI: Period = 21, show level 50.
• Optional: tick/volume indicator for confirmation.
• Session: mark NYSE open time on your broker server; trade only within the first 2 hours.

4. Trading rules

4.1 Filter / Bias

• Only consider Longs if RSI(21) closed above 50.
• Only consider Shorts if RSI(21) closed below 50.

4.2 Signal (ignition candle)

• The ignition candle is a recently closed candle with clear momentum characteristics (strong body, or a rejection wick). Use it as the reference candle.

4.3 Entry

• Long: place Buy Stop at High(ignition) + 3 points.
• Short: place Sell Stop at Low(ignition) − 3 points.
• Alternatively use a market order if price already exceeded the trigger.

4.4 Stop-loss

• Long SL: Low(ignition) − 3 points (or below recent swing low).
• Short SL: High(ignition) + 3 points.

4.5 Take-profit & Trade Management

• Base target: R:R ≥ 1:2.
• Options: scale-out (e.g., 50% at 1:1, trail rest), multi-TP levels, or trailing stop.
• If volume/ticks do not increase within ~15 seconds after ignition, consider skipping the trade.

4.6 Invalidation

• Ignore/cancel signals if: major news is imminent, spread abnormally wide, or higher-timeframe structure invalidates the bias.

5. Position sizing & Risk Management

• Risk per trade: 0.5%–1% of equity.
• Compute lot size from SL distance to maintain chosen risk percent.
• Pause trading and review after 2–3 consecutive losses.
• Limit concurrent positions (1–2 max for this approach).

6. Backtest & Validation

• Backtest 1–3 months of M1 data (6+ months preferred for confidence).
• Include realistic spread and slippage in simulations.
• Log each trade: entry, SL, TP, reason, outcome. Track expectancy and max drawdown.

7. When NOT to trade

• During high-impact news or scheduled events.
• In sideways, low-volume markets where ignition lacks confirmation.
• When spreads or execution latency spike.

8. Variations & Optimizations

• Test RSI(14) vs RSI(21) to evaluate noise vs responsiveness.
• Add a trend filter (e.g., EMA50 on M5) for alignment.
• Require a tick/volume spike for extra confirmation.

9. Pre-trade checklist

• RSI(21) applied and visible.
• NYSE opening time marked on broker server.
• Risk per trade set (0.5–1%).
• Spread acceptable and no high-impact news.
• Daily loss cap defined.

10. Conclusion

A simple, momentum-driven opening strategy for US30. Easy to test and implement; success requires strict discipline, careful SL placement, and consistent risk control.

11. FAQ

Q: Should I trade outside the NY opening?
A: The strategy is optimized for opening momentum; trading outside requires re-testing and rule adjustment.
Q: Are “points” equal across brokers?
A: Check the instrument contract specs — US30 point definitions and spreads vary by provider.