RSI 5 Day Look Back for Entry and Exits
I have had very positive results using the RSI (Relative Strength Indicator) 5 day look back for entry and exits in my swing trades. The usual default of the RSI is 14 days on most chart settings (ie...Stockcharts.com). For a swing trader with a 2 to 5 day time frame the RSI (14) day look back is inadequate. I know this site advocates using the Williams % indicator to help with entry and exits but I find the RSI (5) to be more "robust". Just my personal choice.
The RSI(5) strategy is simply a timing devise for entry and exit, it is NOT a set up. The entry begins when the RSI (5) is below 30 and starts to move above 30. Once it crosses 30, I enter the stock. 80% of the time I will hold this stock until it crosses above 80. At this time, I sell the stock when it crosses below 80. The other 20% of the time, I sell before it gets to 80 because I can see from the chart (area of resistance) that it probably won't get to 80 so I just sell the stock when it hits resistance.
By the way, I do not use trailing stops. I use the RSI (5) 80 rule or sell when the stock hits a resistance price area. Also, I will usually sell the stock if it goes up 4 straight days in a row or goes up 10% in two days. I do not like to give back profits and so I am not willing to allow the stock to retrace any price that I feel will invalidate my risk/reward ratio.
Of course, I have my 2% stop loss in the trading plan when I enter and use the money managment sizing concept advocated in this site as well.
If anyone is interested, I will be glad to write up my swing trade set up for you to evaluate. In the meantime, I recommend trying the RSI(5) strategy for entries and exits. It can also be used as a filter or confirmation signal of the swing trade pullbacks.
Best of trading.