To turn my RSI8 system into a truly mechanical one, I now plot the lines and have a perforation margin as well, 8 pips away. The perforation should not be violated or you must reverse your direction.
As part of the system, you can instate rules such as a new high/low read sets a new break out point.
Such a reset happened on Friday, and was overrun the same day – and even back tested later on.
Basically, if you were long already, you simply had to stay long. There are only three things that can reverse the price back down now:
1. Another 82+ reading, that sets the RSI limit (and the perforation), and later price makes it into this field with an RSI, that is out of overbought (<77).
2. Price makes a run for it, it tags the 1.18-1.1820 current sell field, and RSI does not get overbought (<77).
3. The opposite of the following picture happens: you start getting Sync-Async sequences, but on the upside.
Currently I only call Async highs qualified if they are at least 6, but not more than 10 bars away from the Sync high.
As for perforation in my life, just yesterday I decided on wanting to write a book on computer aided trading.
Computer Aided Trading
Welcome to the ERA of the Hybrid trading, dear reader. There is a never ending quest of finding new edges to boost bottom lines. We, the sole traders are starting to use computers in a more active manner, we entrust more and more of the decisions to programs for we have come to know intimately, that we are very limited in our abilities.
The programs are there when you cannot be, they can interact instead of you, and if they are set right, they can prevent losses or make gains on their own initiative.
There is one more thing that seldom anybody talks about: the advantage of making automated trading routines is that it is an active conversation, where you, the programmer would end up improving in skills, you would be able to find many of your own personality flaws, and your thinking would be stimulated into fining treasure mode.