The Relative Strength Index is one of the famous forex indicators from the oscillator class. and you can download as much as you can forex indicators from forexprofitway The RSI indicator defines the overbought and oversold condition of a currency pair. J. Welles Wilder Jr. Introduce the trading indicator to the world in a seminar in 1978.
RSI is a forex indicator that moves from 0 to 100 levels. The basic trading idea of this forex indicator is to sell when a currency pair moves above the 70 levels and buy when the instrument price moves below the 30 levels. Furthermore, there are many trading strategies based on the relative strength index like divergence, trend continuation, and the price momentum calculation. However, the formula of the RSI is very important that every trader should know.
The calculation of the Relative Strength Index has two parts. In the first part, the average gain or loss is calculated in a specific number of periods. Generally, in the standard indicator, 14 periods are used to calculate the first value. It calculates the average percentage of gain and loss in the last 14 number of timeframe following the formula-
Based on the calculation of the first part for 14 periods, the final value of RSI is calculated following the calculating method-
Generally, RSI is overbought above the 70 levels and oversold below the 30 levels. However, it depends on the nature of the trading asset. If a currency pair repeatedly test the 70 levels and does not provide a reliable signal, you can consider 80 as the overbought level. On the other hand, identifying the market trend is also important. When a currency pair moves with a strong uptrend, it may violate the oversold zone until it finds an appropriate resistance level.
Moreover, these levels are also helpful in identifying the take profit level. You can enter a buy trade based on a bearish reversal at RSI 30 level and hold it until it reaches the overbought zone. If the price starts to stall at 70 levels, you can book some profit or close your trade with gains.
Besides the overbought and oversold zone, this forex indicator also provides reliable price patterns and support and resistance zones. If the price moves within a strong uptrend, the 40-50 RSI zone would provide a potential support zone. Similarly, in a downward market, the 50-60 zone works as a potential resistance zone at the bullish correction.
Usually, RSI follows the market by creating higher highs and lower lows. If the RSI follows the trend by creating a new higher high, the trend would be stronger. On the other hand, any discrepancy between the RSI and the price might create a potential reversal trading strategy.
When a price creates a new higher or lower lows, but RSI does not follow, it creates a divergence. Divergence is a reliable reversal trading strategy where you can predict the potential market reversal zone.…
Forex is the main market in the world. This is because it is the market that moves the most money, the largest and most liquid, but we do not know everything. Today, we tell our readers some of the characteristics of this market that most experts don’t usually talk about.
It is an OTC market (over the counter) because it contracts to the measures of the people who are making the transaction. This means that it is negotiated between parties.
Known as FOREX (Foreign exchange), the forex market is trading currencies at real prices. This means that you buy (or sell) one currency in exchange for a different currency’s sale (or purchase).
Governments can manipulate prices.
Printing banknotes can change the number of money in circulation, but in the right way so as not to break the economy’s status quo.
Certain brokers don’t play fair.
Well, they can see the bottom of the market and go against their clients. Forex has high spreads that do not always make them interesting, and only if the profit is really interesting, and it may be worth paying the toll fee that it supposes in cases such as Dax, where the profit per point is 25 dollars. Currently, brokers who use bad practices against their clients are persecuted and fined.
What Makes A Newbie In Trading Forex?
Generally, a novice starts in Forex because he has little money, and the Forex lots are small. Accounts with $ 1000 are usually opened.
There is only one vital rule: “Do not liquidate your capital.”
In futures, we will need accounts starting at $ 5000. CFDs can be opened from $ 1000 if you are going to take contracts for differences that are $ 1.
Yes, you heard me very well … Can I trade to win or lose $ 1? Yes, in Forex and CFD’s. In some futures like the mini Down, you can trade at $ 5.
What does this mean? That it is not expensive to make a bag and is available to anyone; But then the following question arises, if it is accessible, why don’t more people do it?
Trading is the great unknown of the stock exchanges.
Many people do not believe that you can make a living from trading because they would have already found out if it were so.
They are not trained. They are launched into the market without the knowledge, which leads to losing accounts, abandoning the opportunity to know this profession because if they have not achieved it, it is impossible.
Do not let others tell you what you can and not try. If you think that trading is for you, learn a method that helps you to trade Forex, Futures, and CFDs.
Suppose you can afford a $ 5,000 account. Make futures. Its commissions are low, and it is the first division of the bag. If you can’t, then you will have to go to CFDs or Forex.