Most of the traders are willing to trade by Free Forex Signals or sometimes paid. It is very unfortunate that most of the traders don’t want to learn the basics of Forex. Very few traders go for Forex Learning, learn something but never implement it on trade. Therefore, they cannot earn a profit from Forex. The best way to earn something by Forex Signals is to take the signals, check the signal in your system and if it is the same in your system, go for it and it is very easy to identify some signals by using RSI indicator.

Today, we are going to talk about one of the popular chart indicator RSI. It is very unfortunate that most of the traders don’t know the abbreviation of RSI. RSI’s full form is the Relative Strength Index which was developed by one of the popular technical analysts J. Welles Wilder. RSI indicator helps traders to evaluate the strength of the market whether it is oversold or overbought.

The indicator normally placed at the bottom of the chart in a separate horizontal window. RSI indicator scaled from 0-100. The area is also separated into three primary zones which indicate the oversold area, overbought area and neutral area.

  • 00-30: Oversold Area
  • 30-70: Neutral Area
  • 70-100: Overbought Area.

If RSI reading is higher than 70, that means the market is in the overbought situation and there are higher possibilities of price weakening or going down. Therefore, some traders interpret that an overbought currency is an indication of the rising trade to be reversed and there is an opportunity to sell.

 

 

From the picture, we can see that the RSI level was higher than 70 in XAUUSD (GOLD) and the CMP was 1586. After that, it came to 1554 within few days. Here we can see if a Seller entered into the trade during the price, he had the opportunity to gain more than 300 pips in Gold within a few days.

 

On the other hand, if RSI reading is lower than 30, it indicates the market is in the oversold situation and there are higher possibilities of price strengthening or going up. As a result, some traders interpret that an oversold currency is an indication of the bulling trend to be reversed and a higher opportunity to buy.

 

From the picture, we can see that the RSI level was lower than 30 in XAUUSD (GOLD) and the CMP was 1286. The next day it reached 1300 which means a raise of 300 pips. If a buyer entered into the trade and took the opportunity, he could gain 140 pips easily within a day.

 

RSI level 50 indicates the trending whether it is bullish or bearish. If the RSI is above 50 (level) and it shows a rising trend, it emphasizes a bullish trend until the indicator reaches 70 (level). Conversely, If the RSI is below 50 (Level), it emphasizes a bearish trend until the indicator reaches 30 (Level).

Now the question whether might come to your mind is “How to trade by using RSI?”

 

The first is to know the basics of the RSI. Then you have to identify the trend. If you find the RSI is above level 50, the possibility of downtrend is very less. What you can do is to wait for a confirmed breakout and enter into the buy till level 70.

On the other hand, if the price is below 50, wait for the breakout confirmation and go for the sell till level 30.

If there is any fundamental news, war or any economical or political uncertainty, technical analysis or RSI indicators will not work. Before implementing on real account, a trade need to practice RSI indicator and be used to with its behavior.However, If you have any question, you are free to ask by commenting on the post.