RSI TMA Centered Bands

The RSI TMA Centered Band is a momentum oscillator used to identify trend reversals and help determine swing trading setups.

Swing trading becomes more challenging for short-term traders due to the random changes in price behavior in capital markets. For this reason, most scalpers and day traders tend to depend on multiple indicators only to acquire a better confirmation of trend reversals.

If you’re a fan of counter-trading strategy, the RSI TMA Centered Bands can be an ideal companion to your daily trading routine.

This guide explains how to apply the RSI TMA Centered Bands indicator in MT4, including its buy-sell trading strategy.

What is the RSI TMA Centered Bands Indicator?

The RSI TMA Centered Bands indicator combines the Relative Strength Index and TMA Bands for identifying crucial buy-sell signals in overbought/oversold markets.

RSI TMA Centered Bands Chart Setup
RSI TMA Centered Bands Chart Setup

Most RSI indicators signal market momentums based on fixed readings only. For instance, if the index turns above 50, it means a bullish market. In the same way, if the index hits above 70, then consider the market as overbought.

The RSI TMA Centered Bands utilize a unique way of applying RSI with dynamic bands instead of a fixed one. The TMA bands change their position based on the changes in price and market momentum. It enables RSI to deliver real-time trend reversal signals by plotting crossover with the dynamic bands.

RSI TMA Centered Bands Trading Strategy

The RSI rebounding from the higher or lower TMA bands provides a primary confirmation of the upcoming trend. For example, the RSI drops from the upper band indicate the price may initiate a bearish movement following the overbought market.

The secondary confirmation comes when the RSI breaks the mid-level of the TMA bands. The index line is exceeding the mid-level signals a bullish trend. Oppositely, RSI drops below the TMA center line to signal a bearish market.

Buy Signal

Activate buy after meeting the following conditions:

  • The RSI line exceeds the center of the TMA bands, indicating a bullish trend.
  • The price rejects support or breaks above a significant resistance.
RSI TMA Centered Bands Buy Signal
RSI TMA Centered Bands Buy Signal

Sell Signal

Activate sell order after meeting the following conditions:

  • The RSI line drops below the center of the TMA bands, indicating a bullish trend.
  • The price rejects resistance or breaks below solid support.
RSI TMA Centered Bands Sell Signal
RSI TMA Centered Bands Sell Signal

RSI TMA Centered Bands Pros & Cons

Pros

  • The combination of RSI and TMA bands generates strong trend-reversal signals.
  • Works on multi-timeframes, enabling you to anticipate both short and long-term buy-sell opportunities.
  • It suits swing trading strategy and also helps in making on-trend trading decisions.

Cons

  • It only confirms the changes in market trends but doesn’t indicate precise trade entry and exit levels. 

Conclusion

The RSI TMA Centered Band is a handy addition to your trading toolkit. An ideal forex indicator will almost certainly boost your chances of trading success. Nonetheless, keep in mind the importance of having realistic expectations. Just like other technical indicators, it cannot generate loss-proof trading signals. Its performance will be highly variable depending on market situations. Therefore, consider support and resistance, moving averages, and additional price-level tools for better trade confirmation.

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