Cliobra

The RSI + ADX Strategy for Filtering Out False Trend Signals

Last Updated on February 25, 2025 by Arif Chowdhury

Have you ever entered a trade only to watch it reverse right after?

It’s frustrating, right?

You’re not alone.

As a seasoned Forex trader since 2015, I’ve faced my fair share of false trend signals.

But through my journey, I discovered a powerful combination: the Relative Strength Index (RSI) and the Average Directional Index (ADX).

This duo can filter out the noise and help you make more informed trading decisions.

Let’s dive into how the RSI + ADX strategy works and why it’s a game-changer.

Understanding the Basics

What’s RSI?

The RSI measures the speed and change of price movements.

It ranges from 0 to 100.

  • Above 70: Overbought conditions.
  • Below 30: Oversold conditions.

What’s ADX?

The ADX quantifies the strength of a trend.

It doesn’t indicate direction, just how strong the trend is.

  • Above 25: Strong trend.
  • Below 20: Weak trend.

Why Use RSI + ADX Together?

Using these indicators together helps you confirm trends and filter out false signals.

Here’s how they complement each other:

  • RSI identifies potential reversals.
  • ADX confirms trend strength.

When you combine them, you get a powerful filter against fake-outs.

How to Implement the Strategy

  1. Set Up Your Indicators
    • Add the RSI and ADX to your trading chart.
    • Use standard settings: RSI (14) and ADX (14).
  2. Identify Trends
    • Look for ADX above 25 to confirm a strong trend.
    • Check the RSI for overbought or oversold conditions.
  3. Making the Trade
    • If the ADX is high and the RSI is above 70, consider selling.
    • If the ADX is high and the RSI is below 30, consider buying.

Key Considerations

  • Timing is Everything: The market can change quickly. Monitor your indicators regularly.
  • Use Stop Losses: Protect your capital. A good rule of thumb is to set a stop loss just outside the recent high/low.
  • Practice: Before diving in, backtest your strategy.

Enhancing Your Trading with Advanced Tools

Now that you understand the RSI + ADX strategy, let’s talk about enhancing your trading experience.

I’ve developed 16 sophisticated trading bots that incorporate this strategy, along with various others.

These bots are designed to trade on H4 charts, focusing on long-term gains between 200-350 pips.

With internal diversification across four major currency pairs—EUR/USD, GBP/USD, USD/CHF, and USD/JPY—you minimize correlated losses.

This layered approach increases your chances of consistent profitability while managing risk effectively.

And the best part? I’m offering this EA portfolio for FREE!

You can check it out here: My Trading Bots Portfolio.

The Importance of a Good Broker

Now, let’s touch on something equally vital: choosing the right broker.

The right broker can make a world of difference in your trading experience.

Look for:

  • Tight spreads: They save you money.
  • Fast execution: Timing is everything in Forex.
  • Excellent customer support: You need quick help when things go sideways.

I’ve tested various brokers and can confidently recommend some of the best. Check them out here: Best Forex Brokers.

Final Thoughts

The RSI + ADX strategy is a robust tool for filtering out false trend signals.

By combining these indicators, you’ll enhance your trading decisions and reduce losses.

Add to that my 16 trading bots that utilize this strategy and more, and you have a winning combination.

Don’t forget to choose a reliable broker to maximize your trading success.

Happy trading! 🚀