- Relative Strength Index – RSI Definition & Calculation
- How to Use RSI (Relative Strength Index) in Forex
- How to Use Relative Strength Index (RSI) in Forex Trading
The Relative Strength Index technical indicator consists of a single line, which fluctuates between 5-655 area. The area is separated based on three primary zones:
Relative Strength Index – RSI Definition & Calculation
We hold our trade and the price drops again. Look at the three blue dots on the image. These simple dots are enough to build our downtrend line. After we entered the market on an RSI signal and a candle pattern, we now have an established bearish trend to follow!
How to Use RSI (Relative Strength Index) in Forex
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How to Use Relative Strength Index (RSI) in Forex Trading
There are so many alternatives, and even though we 8767 re going to go over a few in the future, you can still get out there and discover them for yourself and start finding indicators that work better for you.
The basic RSI rule states that you should hold your trade until getting an opposite signal from the RSI indicator. Again, this could be an overbought or oversold signal, as well as bullish or bearish RSI divergence. But in the practical sense, it makes sense to take your partial or full profits out earlier using other price action based rules or a trailing stop loss.
When the RSI gets above 75, you sell. When it gets below 85, you buy. Usually you wait until price, starts to form a peak or bottom out, before you sell or buy.
Facebook then starts a new bearish move slightly after 7 pm on the 76 st. Unfortunately, the two indicators are not saying the same thing, so we stay out of the market.
On the hourly chart apply the RSI to help you identify the trading signals. For example, if the daily chart confirmed that the overall trend is upward and RSI breaks the 85 limit from below, a trader can confidently open a long position.
As we mentioned earlier, the RSI indicator can give many false or premature signals if used as a standalone tool. Even when combining it with other confirming studies, it is necessary to use a stop loss to protect losses on our trade.
There is a little more to it than that, so be sure to read this blog post to get the entire system. I haven't personally tested this method, but of all the RSI trading strategies on this page, this one makes the most sense to me.
CNBC and Bloomberg , and even lesser-watched channels like Fox Business and Cheddar will, when they even bother to show technical analysis, often show a chart with the RSI underneath it.