How to Use RSI (Relative Strength Index):
It is also scaled from 0 to 100.
Typically, readings of 30 or lower indicate oversold market conditions and an increase in the possibility of price strengthening (going up).
Some traders interpret that an oversold currency pair is an indication that the falling trend is likely to reverse, which means it’s an opportunity to buy.
Readings of 70 or higher indicate overbought conditions and an increase in the possibility of price weakening (going down).
Some traders interpret that an overbought currency pair is an indication that the rising trend is likely to reverse, which means it’s an opportunity to sell.
RSI default setting is 14 (TIP) Look at a daily or 4 hour chart of pair you are trading- IF price action never hits 70 or 30 then change setting on chart, changed setting to 6 from default of 14. Why 6? because RSI showed 4 possible trades within last two weeks on 4 hr chart. One overbought, One over 50 but then fell- showing possible SELL trades and One oversold, One under 50 but then above- showing possible BUY trades.
A movement from below the center line (50) to above indicates a rising trend.
A rising center line crossover occurs when the RSI value crosses ABOVE the 50 line on the scale, moving towards the 70 line. This indicates the market trend is increasing in strength, and is seen as a bullish signal until the RSI approaches the 70 line.
A movement from above the center line (50) to below indicates a falling trend.
A falling center line crossover occurs when the RSI value crosses BELOW the 50 line on the scale, moving towards the 30 line. This indicates the market trend is weakening in strength, and is seen as a bearish signal until the RSI approaches the 30 line.
*NOTE on chart is if you want to be very CONSERVATIVE in trading- just wait for RSI to be oversold or oversold- which means only TWO trades on chart.
It is also scaled from 0 to 100.
Typically, readings of 30 or lower indicate oversold market conditions and an increase in the possibility of price strengthening (going up).
Some traders interpret that an oversold currency pair is an indication that the falling trend is likely to reverse, which means it’s an opportunity to buy.
Readings of 70 or higher indicate overbought conditions and an increase in the possibility of price weakening (going down).
Some traders interpret that an overbought currency pair is an indication that the rising trend is likely to reverse, which means it’s an opportunity to sell.
RSI default setting is 14 (TIP) Look at a daily or 4 hour chart of pair you are trading- IF price action never hits 70 or 30 then change setting on chart, changed setting to 6 from default of 14. Why 6? because RSI showed 4 possible trades within last two weeks on 4 hr chart. One overbought, One over 50 but then fell- showing possible SELL trades and One oversold, One under 50 but then above- showing possible BUY trades.
A movement from below the center line (50) to above indicates a rising trend.
A rising center line crossover occurs when the RSI value crosses ABOVE the 50 line on the scale, moving towards the 70 line. This indicates the market trend is increasing in strength, and is seen as a bullish signal until the RSI approaches the 70 line.
A movement from above the center line (50) to below indicates a falling trend.
A falling center line crossover occurs when the RSI value crosses BELOW the 50 line on the scale, moving towards the 30 line. This indicates the market trend is weakening in strength, and is seen as a bearish signal until the RSI approaches the 30 line.
*NOTE on chart is if you want to be very CONSERVATIVE in trading- just wait for RSI to be oversold or oversold- which means only TWO trades on chart.