RSI Indicator Measures Momentum of a Forex Trend.

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

RSI Center-line: The center-line for this indicator is 50. The RSI Centerline is used to generate forex buy and sell signals.

RSI Forex Strategy

Buy Signal

A value above 50 implies that the market trend is in a bullish phase as average gains are greater than average losses. (RSI above 50: prices closed higher than where they opened)

• RSI Above 50, the buyers have greater momentum than the sellers and price on the chart will keep going up as long as this RSI indicator stays above 50.

Sell Signal

Values below 50 indicate a bearish phase in the forex market prices are generally closing lower than where they opened. (RSI below 50: prices closed lower than where they opened)

• RSI Below 50, the sellers have greater momentum than the buyers and price on the chart will keep going downwards as long as RSI indicator stays below 50.

Relative Strength Index or RSI is one of the most popular indicator used in Forex trading. It is an oscillator indicator which oscillates between 0 - 100. This a trend following indicator. It indicates the strength of the trend, values above 50 indicate a bullish trend (prices closed higher than where they opened) while values below 50 indicate bearish trend (prices closed lower than where they opened).

RSI Indicator - How to Trade with RSI Indicator

In the trading example above, when the indicator is below 50, the price kept moving in a downward market trend. The price continues to move down as long as RSI indicator was below 50. When the RSI indicator moved above 50 it showed that the momentum had changed from sell to buy and that the downward trend had ended.

When the RSI indicator moved to above 50 the price started to move upwards and the trend changed from bearish to bullish. The chart price continued to move upwards and the RSI indicator remained above 50 afterwards.

From the trading example above, when the trend was bullish sometimes the RSI would turn downwards but it would not go below 50, this shows that these temporary moves are just retracements because during all these time the price trend was generally upwards. As long as RSI indicator does not move to below 50 the current trend remains intact. This is the reason the 50 center line mark is used to demarcate the signal between bullish and bearish signals.

The RSI technical indicator uses 14 day period as default period, this is the period recommended by J Welles Wilders when he introduced it. Other oftenly used periods used by traders are the 9 and 25 day moving average.

How to Place RSI Indicator on Chart on MetaTrader 4

This Tutorial will explain how to place the RSI Indicator on a Chart in the MetaTrader 4 Platform. For technical analysis: Technical analysis of RSI.

How to Place Forex Indicators in MetaTrader 4 Trading Charts

Step 1: Open Navigator Window on Forex Platform

Open Navigator window as shown and illustrated below: Go to "View" menu (click on it), then select "Navigator" window (click), or From Standard Tool Bar click the "Navigator" button or press keyboard short cut keys "Ctrl+N"

On Navigator window, select 'Technical Indicators', (Double Click)

Step 2: Expand the Indicators Menu on Navigator

Expand the menu by clicking the expand button marker (+) or double click the "indicators" menu, after this the button key will then now appear as (-) and will now be shown as a list as shown below.

From the Above window you can then place any technical indicator you want on the chart.

Placing RSI on a Chart

Step 1: Choose the RSI button key in MetaTrader 4 list of indicators as displayed below:

Step 2: Double click RSI Button, and click okay to insert the RSI on the chart as shown and illustrated below:

Edit Relative Strength Index Indicator Settings

To Change Settings, right click in RSI, choose properties and then edit properties of trading indicator using pop-up menu that pops and click ok button after you've changed settings.

The following popup appears and technical indicator settings can be edited from this popup.