Sometimes new uses for old things can benefit us or they become new and improved. RSI, Relative Strength Index is one of those things when it comes to forex trading. Until recently, RSI was used to determine whether prices were overbought or oversold. In fact, many traders still use it that way; Even experts. However, it has been shown that RSI is not a good indicator for overbought and oversold. When the price is too high or too low to let them know that traders are using it they are making fun of themselves. No index can do that.
Second, RSI has always been one of the main indicators for identifying price and momentum variations. Although this is an algorithmic signal, traders misunderstand why and when it is formed.
New concept of RSI signal
The first and most important new concept for RSI is that there are only 4 signals that traders need to be aware of. These are bearish and bullish divergence and bearish and bullish reversals. These signals can be located manually on an RSI chart or they can be located automatically on the RSI Paint indicator, which is specifically designed to detect all deviations and reversals. The opposite signals whether you are a scalper, a short-term trader or a long-term trader, a trade of significant profits leads to foreign exchange.
Look at any chart and learn how to read it
Many traders, especially new traders, look at the charts and start drawing trend lines. Why? Because they have been taught it through books, seminars and web sites. Don’t do it, it’s wrong. Trend lines have no value but without telling you where the trend has come from, where it is going. This is because of the speed at which a trader needs to determine the speed of a trade. RSI uses 4 signals to give a clear picture of what is happening on any trading chart. This can be done by hand or automatically using a paint indicator designed specifically for MetaTrader 4, so that the trader does not have to do it.
The moment means money
If you knew where the momentum in the market would be and when you knew when it would happen and you knew where it was going you would be a very rich person. RSI, using 4 RSI signals, looks for velocity. 4 Signal Momentum 1 identifies the Retracement Momentum so that the trader knows that the trade is moving again and they identify Momentum 2 which is the Continuity Momentum so that the traders know when the prices are going to join the trend again.
What else does a businessman need to know?
Speed 3 is the speed created by the market. This speed is not random. It can be located by studying it statistically where it occurs most often. This speed is the speed that drives money towards earning price
When you trade using RSI you will know what the currency pair you are trading will do. You will know the points of velocity and you will know when velocity 3 is most likely to occur. These new concepts of RSI make it an invaluable business method.