RSI Swing Failure Trade Setup
RSI swing failure can be a very accurate method for trading short term moves. It also can be used for trading longterm trends but it is best fitted for shortterm trading especially for those traders who trade reversals.
RSI swing failure swing setup is a confirmation of a pending market price reversal. This swing failure setups a leading break-out signal, it warns that a support resistance level in the market is going to be penetrated. This setup should occur at readings above 70 for an upward trend and values/readings below 30 in a downwards trend.
Swing Failure In an Upwards Trend
If the RSI touches 79 then pulls back to 72, then rises to 76 and finally drops to below 72 this is regarded a failure swing RSI setup. Since the 72 level is an RSI support level & it has been penetrated it means that price will and follow and it will penetrate its support zone.
In the example illustration below, the RSI touches 73 then pulls back/retraces to 56, this is a support level. The indicator then rises to 68 and then drops to below 56, thus breaking the support zone. The price then follows afterwards breaking it support level. The RSI swing failure is a leading signal and it's confirmed when price also breaks it support zone. Some traders open trades once the swing failure is complete while the other traders wait out for the price confirmation, either way it's for a forex trader to decide on what method works best for them.
RSI Swing Failure in an Upwards Trend
Swing Failure Setup In a Downwards Trend
If the RSI hits 20 then pulls back to 28, then falls to 24 & finally penetrates above 28, this is regarded a failure swing setup. Since the 28 level is an RSI resistance level and it has been penetrated it means that price will & follow and it will penetrate its resistance zone.
RSI Swing Failure in a Downward Trend
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