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Relative Strength Index RSI Analysis and RSI Signals

Developed & Created by J. Welles Wilder, expounded in the book "New Concepts in Technical Systems".

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

Relative Strength Index measures the energy of a currency pair; values/readings above 50 signal bullish momentum while values/readings below 50 center-line signify bearish energy.

RSI Analysis Trading - RSI - How to Build RSI Strategy - Forex RSI Trade Strategies Tutorial

RSI is drawn as a green line
Horizontal dashed lines are plotted & drawn to identifying overbought and oversold levels are - 70/30 levels respectively.

Forex Analysis and How to Generate Signals

There are various techniques used to trade, these are:

50-level Cross-over Signals

Buy trade signal - when the indicator crosses above 50 mark a buy/bullish signal is generated.
Sell Signal - when the trading indicator crosses below the 50 mark a sell/bearish signal is generated.

RSI Buy Sell Signals - RSI Analysis FX - RSI Indicators

RSI Trading Patterns

Traders can draw trend lines & map out chart patterns on the RSI. The Relative Strength Index often forms patterns like head and shoulders pattern which might & may not have formed & shaped clearly on price chart.

Forex Support/Resistance Break Outs

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

RSI Swing Failure - RSI Analysis FX - RSI Indicator

Swing Failure - Support and Resistance Break-out

Over-bought/Oversold Conditions in Indicator

Overbought levels above 80
Over-sold - levels below 20

These levels can be used to generate Forex signals like when RSI turns up from below 20 after oversold, buy & sell when the RSI crosses to below 80 after over-bought, sell. These signals aren't suitable for Forex because they're prone to a lot of whipsaws.

Divergence Forex Setups

Divergence trading is one of technical analysis method used to trade reversals of the price trends. There are four types of divergences that can be traded and transacted with this trading indicator covered and discussed on the divergence guide on this web site.

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