RSI XAUUSD Technical Analysis and RSI Signals

Developed by J. Welles Wilder, explained in the book "New Concepts in Technical Trading Systems".

Relative Strength Index is the most popular indicator & it is a momentum oscillator and a trend following indicator. RSI compares a price magnitude of the recent price gains against its magnitude of recent losses price losses & draws this data on a scale of values that ranges between 0-100.

Relative Strength Index measures the momentum of a instrument: values above 50 signify bullish momentum while values below 50 center-line signify bearish momentum.

• RSI is drawn as a green line
• Horizontal dashed lines are drawn to identifying over bought & oversold levels are i.e. 70/30 levels respectively.

XAUUSD Technical Analysis & How to Generate Signals

There are several techniques used to trade, these are:

50-level Crossover Signals

• Buy signal - when the indicator crosses above the 50 a buy/bullish signal is given.
• Sell Signal - when the indicator crosses below 50 a sell/bearish signal is given.

RSI Gold Setup Patterns

Traders can draw trend lines & map out chart setups on the RSI indicator. The Relative Strength Index often forms xauusd patterns such as head and shoulders pattern which might not have formed clearly on the price chart.

Gold Support/Resistance Break outs

RSI is a leading indicator & can be used to predict Support/Resistance Breakouts before price breaks its support/resistance level. RSI uses the swing failure signal to predict when price is about to break support and resistance areas.

Swing Failure - Support and Resistance Break out

Overbought/Oversold Conditions on Technical Indicator

• Overbought- levels above 80
• Oversold- levels below 20

These levels can be used to generate signals such as when RSI turns up from below 20 after oversold, buy and sell when RSI crosses to below 80 after overbought, sell. These signals are not suitable for Trading because they are prone to a lot of fakeouts.

Divergence Setups

Divergence trading is one of the technical analysis method used to trade reversals of the price trends. There are 4 types of divergences that can be traded with this indicator covered in the divergence tutorial on this website.