Aluminium RSI Strategy

No. RSI below 30 is a warning that price may be oversold, not an automatic buy signal. Wait for confirmation: a bullish reversal candle (hammer, engulfing), RSI starting to turn up, or price bouncing off support. RSI can stay oversold for extended periods in strong downtrends.

Use the standard RSI(14) with 70/30 overbought/oversold levels. This is well-tested and works for aluminium on 4H and Daily timeframes. Avoid changing settings based on recent results - standard settings are robust.

In strong uptrends (like during energy crises when production costs spike), RSI can stay overbought (>70) for extended periods. This is why you shouldn't just short because RSI is overbought - always consider the trend and wait for confirmation.

RSI can work alone for basic signals, but combining with a trend indicator (like 50 EMA) and checking copper RSI improves results. This helps you avoid counter-trend RSI signals. Keep it simple: RSI + 50 EMA + Copper confirmation is sufficient.

4H (4-hour) is ideal for swing trading aluminium with RSI. It provides clear signals without too much noise. Daily is good for position trading. London session (LME) has best liquidity.

Divergence is specific: price makes one extreme (higher high or lower low) while RSI makes the opposite. Random disagreement isn't divergence. True divergence should be clear and visible. Always wait for price confirmation after divergence.

Yes. In uptrends, use 40/80 instead of 30/70 (buy at 40-50 dips, overbought only above 80). In downtrends, use 20/60 (oversold below 20, sell at 50-60 rallies). This prevents fading strong trends.

Check copper RSI before aluminium trades. If both aluminium and copper are oversold (<30), it's a stronger buy signal as industrial metals are broadly oversold. If aluminium is oversold but copper isn't, the signal is weaker.

Regular divergence signals reversal: Price makes new high/low but RSI doesn't. Hidden divergence signals trend continuation: Price makes higher low (uptrend) but RSI makes lower low - suggests the uptrend will continue after the pullback.

London session (6 PM - 2 AM AEST) has best LME liquidity. Evening Australian time is ideal. Asian session can see China-driven moves. Set daily analysis during morning AEST, trade during evening.

Use 3-5 years of aluminium data on 4H or Daily timeframe. Define precise rules (RSI level, confirmation, stops). Split 60/40 for development/validation. Measure: win rate (expect 55-65% for mean reversion), profit factor (target >1.2), max drawdown. Include 2021-2022 energy crisis period.

RSI + 50 EMA + ATR + Copper RSI is effective. RSI for momentum signals, 50 EMA for trend direction filter, ATR for volatility-adjusted stops, Copper RSI for correlation confirmation. Avoid combining RSI with other oscillators.

At 4% drawdown: Review trades for rule adherence. At 6%: Reduce size to 0.5%, increase confirmation requirements. At 10%: Stop live trading, full review, paper trade until consistent. Progressive responses prevent catastrophic loss.

Generally no. RSI 14 is robust across markets. Testing shows strategies that work with RSI 14 usually work with 10-20. Over-optimizing to find 'perfect' period leads to curve-fitting. Use standard 14 and focus on entry/exit rules.

RSI measures momentum, which reflects reaction to fundamentals. Strong energy cost spikes can keep RSI elevated (don't fade). China demand weakness can keep RSI depressed. RSI divergence at fundamental turning points often marks major reversals.