The Metro is an RSI-based indicator that works like a traditional RSI. The indicator uses three RSIs rather than a single one.
This guide will discuss the Metro indicator and how you can trade with it.
What is the Metro indicator?
The Metro is a momentum oscillator that tells the direction of the trend using three RSIs. It oscillates between the 80 and 20 levels and mentions the overbought and oversold levels.
When the Metro reaches near 80, it is in an overbought condition, and we can expect a downtrend. Conversely, we can anticipate an uptrend if the indicator is near 20.
The metro plots the main RSI and slow and fast RSIs. The main RSI works like a traditional one and depends on the moving average calculations.
The fast and the slow RSIs complement the main one, and we get a signal whenever the crossovers occur.
How to trade the Metro indicator?
There are two ways to trade with the metro indicator. The first method is finding crossovers, and the other is overbought and oversold levels.
Let’s explain both of them.
When the fast RSI goes above the small one, and the main RSI is above the 50-level, we can take long positions. Conversely, we can take short positions when the slow RSI goes above the fast one, and the RSI is below the 50 level.
The chart above presents a good long entry point when the fast RSI goes above the slow one.
Another way to trade with the metro indicator is to find overbought/oversold levels. When all the indicator’s RSIs reach near the 80 level, we can expect a bearish reversal. On the flip side, when the Metro’s RSIs reach near the 30 level, we can anticipate a bullish reversal.
Below you can see a bearish reversal. All the RSIs were near 80, so the price started trending downward.
The good thing is the Metro indicator is it works on all timeframes. However, it’s best to apply it on longer timeframes as this can reduce some noise from the lower chart timeframes. Also, you can combine other indicators if you want further signal confirmation.
Buy Signal
- The fast RSI should cross above the slow one. Or, all the RSIs should be close to 20.
- Wait for the price action to continue trading upwards and then enter the trade.
- You could set take-profit at the previous high from the entry point.
- You could set the stop-loss at a recent low.
Sell Signal
- The slow RSI should cross above the fast one. Or, all the RSIs should be close to 80.
- You should wait for the price action to continue trading downwards and then enter the trade.
- You could set take-profit at the previous low from the entry point.
- You could Set stop-loss at the recent high.
Conclusion
The Metro indicator uses three RSIs to tell the direction of the trend. The indicator combines all these RSIs to give a better picture than the traditional RSI. In addition, you can apply crossover and overbought/oversold strategies with the Metro indicator.
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