RELATIVE STRENGTH INDEX
Relative Strength Index technical indicator
Technical analysis in Forex with the Relative Strength Index (RSI) is not complicated. The RSI is a fairly simple, widely used by technical traders technical indicator. Yet he gives quite a few forex information and he does exactly what its name says: measuring the relative strength of a trend movement. The RSI helps you thus better assess what to expect from a trend started, which increases the chance of successful hook.
How exactly does the RSI
The RSI measures the strength of price movement by the number of times the currency pair closes higher compared to the number of times the currency pair closes lower. This is usually compared with 14 periods, with more recent data is weighted by using exponential averages, ie, how recent the data, the heavier they count.
The result is a number between 0 and 100 (as with stochastics). A measurement above 70 indicates a overbought situation, a measurement of less than 30 at a oversold situation.
As with Stochastic does not mean that your immediate action should proceed as the RSI is above 70 or below 30 is, it shows only that the price now in an overbought / oversold situation has arrived, and that a reversal of this on change indicates direction of trend.
How to use the RSI
50 euro free markets
A commonly used method in technical analysis to trade the RSI is to look at the RSI compared with the actual price action of the moment. The Forex RSI information that will give that example when prices make new highs while the RSI continue to do so is a reversal of the trend or consolidation likely. (And vice versa with down trends, where prices reach new lows but the RSI does not).
divergence
Spotting the difference between price and momentum divergence is sometimes called, and it is a method for multiple indicators (eg stochastics) works well. At first glance, everything was fine and egg in the trend movement, because prices are higher (or lower, down trend), but the indicator shows that they really mean is afzwakkeing.
Many traders do therefore trend line analysis (eg draw simple trend lines over the peaks / valleys) on the RSI itself. If that trend line itself is in a downtrend while prices still keep rising, then that is a strong indication that so-called trend line is near exhaustion.
The great advantage of the RSI is that it filters out the noise from the market. Price movements can-certainly in the short term very volatile and therefore unpredictable. Because the RSI over a longer period looks (but the more recent periods outweighs) the probability of false signals is much smaller. The RSI in this way so you can help at the right time to open the position.
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Forex is simple follow the trend and you will rich.
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