Forex Oscillators | Relative Strength Index | RSI | ATR

Forex Oscillators | Relative Strength Index | RSI | ATR

Forex Oscillators -today in this article I am going to discuss

about the RSI or the relative strength index indicator.

This is a very popular indicator.

And after that, I will tell you how to use this indicator effectively in our trading. 

The RSI or the relative strength index – Forex Oscillators

 It is an oscillator that moves within a range and the range is 0-100.

In the case of RSI, it is one of the most used leading indicators.

Because the trading signals with RSI generates before anticipated price movements happen.

J Wells Weldon Chania introduced the relative strength index indicator.

Which measures the velocity of price movements during the trading.

Many Traders can use in stocks, Forex, Commodity, futures index, futures bond, or anything that is plotted on the chart.

The formula for calculating RSI.

RSI Formula

What is relative strength?

It is an average gain over a specified period divided by average loss over the same period.

Now the overbought or oversold region is very important RSI is a bounded

indicator. The upper and lower bound are 100 and 0 respectively.

And the specified period that we use to calculate the RSI is generally 14.

But trader or analyst is free to alter the period count to suit his or her analysis.

A lower period count like 10 or 7 will generate more frequent buy and sell signals also few of them will be wrong.

Similarly for a higher period sound like 20 will generate a lesser number of

buy or sell signal.

What is Overbought and Oversold Region of RSI.

RSI- Overbought Oversold

The RSI value above 70 says to be the overbought region.

And while the value is below 30 says to be in the oversold region.

Some other financial instruments can remain very bullish when the RSI may remain in the overbought region for a longer period.

Similarly in a bearish market, the financial instrument can remain very bearish.

And the RSI value of that instrument can remain below 30 for a lengthen the period.

When RSI near 50, and it is sideways so there is no momentum to trade.

How to Buying trade with RSI – Forex Oscillators.

. 

If you are going to buy an instrument with the help of RSI Oscillator so you first watch RSI in Weekly and Monthly chart.

Buying with RSI

If RSI is above 50 or 70 in both the weekly and monthly chart then you have to buy an intraday or daily chart not on the weekly or monthly chart.

When firstly RSI is above 50 on a daily or intraday chart and candle made support on that RSI 50 value. 

Then you have to decide to buy trade on the second candle and that candle must be closed on the bullish momentum. So Now Ready to Buy!

But keep some safeguards with your trading style.

What they are? They are STOP LOSS and TRAILING STOP !!

Your Stop Loss, not more than 2% on your investment, and that may be any swing support low point and that fits with your risk which you are taking.

And I suggest 30-40 pips for trailing Stop. Now It’s up to YOU.

How to Selling trade with RSI – Forex Oscillators 

If you are going to sell an instrument with the help of RSI Oscillator so you first watch RSI in Weekly and Monthly chart.

Forex Oscillators

If RSI is below 50 or 30 in both the weekly and monthly chart then you have to sell an intraday or daily chart not on the weekly or monthly chart.

When firstly RSI is below 50 on a daily or intraday chart and candle made resistance on that RSI 50 value. 

Then you have to decide to sell trade on the second candle and that candle must be closed on the bearish momentum. So Now Ready to Sell!

But keep some safeguards with your trading style.

What they are? They are STOP LOSS and TRAILING STOP !!

Your Stop Loss, not more than 2% on your investment, and that may be any swing support low point and that fits with your risk which you are taking.

And I suggest 30-40 pips for trailing Stop. Now It’s up to YOU.

Next Topics

Positive(Bullish) Divergence

Negative(Bearish) Divergence

 

 

About Muhammad Shahid

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