There are 4 trading signals associated with RSI; Positive and negative deviations and positive and negative inversions. In a 9-year study that began in 2000, the EURUSD had 6,702 reversal signals on the hourly chart with an average of more than 70 pips per trade. This is significant data because it shows that the RSI Index (Relative Strength Index) is an effective Forex standalone trading system.
The reason why RSI works as a standalone system is because RSI measures 2 types of velocities and uses a third type of velocity to enter the market.
Speed type number one
The first type of momentum is measured in RSI when the price is lowered in a trending situation. For example, if prices move downwards, there will be two types of signals that will dominate the RSI chart; Positive deviations and negative contrasts. This indicates that prices were moving in the opposite direction, contrary to what it was doing as a positive deviation for traders who had previously traded differently on RSI or other momentum indicators. This, of course, is quite the opposite. Positive divisions in the downtrend lead to the opposite signals that take the market down. This is the momentum that is slowing down the market by making the market move very fast or by slowly increasing the speed upwards.
Type the second moment
Speed type number one is followed by speed type number two. This is a force that usually warns traders about the fact that the market is actually reversing a retracement and is preparing to rejoin the trend. These are the opposite signals and signals of money-making signals to traders who use RSI as indications of introduction. These signals are the main warning signals that Forex traders look for and signals that create the “possibility” of any trade.
Three speed type
This is a speed that very few traders understand or how to use and makes the difference between an average trader and a profitable trader. Of all the studies I have done, I have never found this idea.
If you Google this topic you won’t find it. The speed I am talking about comes at a certain time in the market and is usually combined with an inverse signal. It happens during business at peak times but should not be confused with instability. At best, it’s post-economic news.
Traders who understand this momentum need to trade with it or know the opposite. The trade brings one speed-high-high entry and the other, in contrast, an order flow trade that uses a backhand sorted speed and can be speed-high-or out-of-speed-time-high. The most sophisticated trade is when the RSI trader catches both the pros and cons of the trade.
RSI is the perfect standalone trading system that trains you to read charts by understanding 4 RSI trading signals and to understand 3 types of trading speed. Once this general idea is understood, the Forex trader is on the way to understanding the ideas behind trading for profit on a consistent basis.