Momentum Trading Strategy using RSI + EMA

2-indicator momentum trading strategy →

Hey there!

Today we’ll discuss a momentum trading strategy using the RSI indicator.

➡️ The RSI indicator is a measure of a stock’s momentum, i.e. the speed and size of its price change. A stock with high RSI levels indicates that the average size of the gain in a stock’s price is greater than the average size of its loss, suggesting strong and aggressive buying pressure.

➡️ The exponential moving average (EMA), is a weighted average of the closing prices of the last few trading sessions, with a higher weight given to the most recent sessions. For example, a 30-day moving average shows the average price of the last 30 trading sessions, where the weight given to the most recent sessions would be more than the weight given to older sessions. An EMA is useful in identifying the trend.

➡️ We will use a multi-period RSI strategy with the following rules to shortlist stocks having high momentum:

  1. Weekly and daily RSI should be more than 60

  2. Weekly & daily closing price should be greater than its 30-period EMA

➡️ One can see the daily and weekly chart of Oberoi Realty fulfilling the above 2 criteria 👇🏼

Daily chart of OBEROIRLTY

Weekly chart of OBEROIRLTY

See how the daily and weekly closing prices are above their 30-period EMAs and the RSIs are greater than 60, signaling bullish momentum.

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📈 Learn to use RSI & other modern indicators to identify stocks with bullish momentum

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None of the above stock ideas are intended as recommendations. Please consult a registered advisor before buying/selling.

✍🏼 If you have any questions or just want to say hi, feel free to write to us at [email protected]

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