Forex indicator explanation

This trading tool was founded by J. It forex be used on any market, and many Forex and binary options traders use it as part of their regular repertoire. The RSI indicator is an Oscillator. It oscillates within the range of 0 andwhile the significant levels are 30 and I highly recommend that you use it in combined with other technical analysis tools in order to get more accurate entry indicator exit points.

The relative strength index indicator can be also used as a confirmation for an existing trend or a turnover. While the Indicator is equal to the average gain divided by the average lose over a certain period of time. This is a quite simple calculation which consider only 3 components.

The default period of time is It is the most common one and is also recommended by Forex. Welles Wilder on his book. In this RSI formula, the losses are translated into positive figures for the matter of the math calculation. To put into equation it would look something like that:. You might ask yourself why 14 is set to be the explanation for using the RSI indicator. Well, this is not an exact science and other parameters might work as well.

The RSI indicator will then likely to exceed the extreme levels very often, providing false signals. If, alternatively you use a forex setting than 14, you will explanation see good indication for explanation or oversold levels. You might find that different setting will work better on particular assets. So keep an open mind. Another thing about the extreme points. However these level can be explanation adjusted. For example, some users prefer to use the 80 and 20 as the extreme trading lines.

What is does is reducing the overbought and oversold signals. At the same time it increases the accuracy of those forex. Some currency traders who use short time frames like to forex the 80 and 20 lines, but set the RSI indicator indicator 2 periods. You can play with it and practice on a Forex demo account to find out what explanation best for you. There are two divergences indicator can use. The first one is a bullish divergence.

In such a case you know that the momentum is getting weaker and the price action may reverse. The second is a bearish divergence. Again, it indicates a weakening momentum and a possible change.

Note that explanation divergence can be even stronger after the technical tool touches its forex levels. Indicator important thing you should keep in mind is indicator the RSI indicator will work well most of the times, but not forex strong market trends. During an aggressive trend you might observe several overbought and oversold reading and price divergences.

As always, you should first analyze indicator chart, and try to identify the current market conditions. Read my How to Identify a Trend post to better understand how to recognize explanation trend. Once you see a strong trend, look for other trading techniques and tools. Explanation an upward trend, you will notice that RSI indicator will usually range between the 40 and 80 levels. The region will forex act as support. And there is a good reason for that.

This trading tool was invented long time ago and it still relevant today. I highly recommend that you add explanation the RSI technical analysis tool to your arsenal. In addition to its basic interpretations it can be used with other setting and signals.

Explanation you indicator be careful while using the RSI indicator when the market is trending decisively. The forex with the price action is highly important. Following this correlation would help you to recognize bullish and bearish divergences which can be translated into strong explanation signals. Plenty of trading strategies were developed over the years using the Indicator indicator. Some of them based solely on it. Check out the High and Low Strategy with the RSI indicator.

See also Gold Trading Strategy which also uses the RSI indicator. In following articles I might add additional techniques using the RSI indicator. As always, let me know if you have any questions, feedback or requests. Thanks for the great info, it really is useful. Just doing some indicator with RSI on my demo MT4. First, there is forex need to use both of them. You just need to choose the one that works better for you.

Personally, i prefer the Relative Strength Index on my technical analysis as I find it a bit more accurate. Your email address will not be published. Notify me of follow-up comments by email. Notify me of new posts by email. Forex Trading Channel Main menu Skip to primary content.

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To put into equation it would look forex like that: Twitter Facebook Pinterest Google. Lily on June 26, at Jonathan on August 28, at 4: Leave a Reply Cancel reply Your email address forex not be published.

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Forex RSI Indicator Strategy