New concepts in RSI are changing the way traders trade Forex
Occasionally new uses for old things can benefit us or become new and improved. RSI, the Relative Strength Index is one of those things when it comes to Forex trading. Until recently, the RSI has been used to determine if prices are overbought or oversold. In fact, many merchants still use it that way; even experts. However, it has been proven that the RSI is not a good overbought and oversold indicator. Traders who use it to tell you when prices are too high or too low are kidding themselves. No indicator can do that.
Second, the RSI has always been one of the main indicators for locating price and momentum divergences. Although this is an algorithmic signal, traders misunderstand why and when it is formed.
The New Concept of RSI Signals
The first and most important New Concept for RSI is that there are only 4 signals that the trader needs to be aware of. They are bearish and bullish divergences and bearish and bullish reversals. These signals can be located manually on any RSI chart or can be automatically located on the RSI Paint Indicator, an indicator specifically designed to find all divergences and reversals. Reversal signals lead to significant profits when trading Forex, whether you are a speculator, a short-term trader, or a long-term trader.
View any graph and know how to read it
Many traders, particularly new traders, look at charts and start drawing trend lines. Because? Because they have been taught to do so through books, seminars, and websites. Without going into it, this is wrong. Trend lines are of no value except to tell you where the trend is coming from, not where it is going. The trader need methods to determine momentum because it is momentum that makes a trade successful. The RSI using all 4 signals presents a clear picture of what is happening on any trading chart. This can be done by hand or it can be done automatically using the paint indicator designed specifically for Metatrader 4, so the trader does not have to.
impulse means money
If you knew where the momentum would be in the market and you knew when it would happen and you knew which way it was going, you would be a very rich person. RSI, using the 4 RSI signals, locates momentum. The 4 signals locate Momentum 1, which is Retracement Momentum, so the trader knows if the trade is being pulled back, and locate Momentum 2, which is Continuation Momentum, so the trader knows when prices are going to turn back. to join the trend.
What else does a trader need to know?
Momentum 3 is the momentum created by the market. This impulse is not random. It can be located by studying statistically where it occurs most frequently. This momentum is the momentum that moves the price in the direction that makes money.
When you trade with RSI, you will know what the currency pair you are trading is doing. You will know the momentum points and you will know when Momentum 3 is most likely to occur. These new concepts in RSI make it an invaluable trading method, one that brings success.