Relative Strength Index (RSI) – Video Tutorial

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Free Trading Education!
    Free Demo Account!
    Perfect for Beginners!

  • Binomo
    Binomo

    2 place in the ranking!

Example: Trading using RSI with Overbought/Oversold Signals

Case Study: Cairn India Limited The chart below is of Cairn India Limited for a period from October 2009 to June 2020.We have plotted points where RSI is considered overbought when above 70 and oversold when below 30.

RSI INDICATOR (RELATIVE STRENGTH INDEX)

RSI indicator is an oscillator which helps predict overbought and oversold market levels. Relative Strength Index (RSI) helps us define the market conditions where trending market has more potential to stop trending, reverse or enter a horizontal range. Learn how to trade binary options with RSI indicator.

IF YOU FIND MY INFO USEFUL, PLEASE LIKE THIS VIDEO, G+ or TWEET AND SUPPORT MY WEBSITE

RSI Indicator Explained

RSI is a commonly used indicator, which is often combined with other indicators. Relative strength index can serve as a main indicator or as a confirmation indicator within many different trading strategies and systems. RSI indicator defines the strength or weakness of a traded asset, based on the closing prices in a selected time period.

RSI is an oscillator, which means it moves (oscillates) between the levels of 0 and 100. The default period setting for RSI is 14. Most commonly used are periods from 10 to 14, regardless of the time frame. Lower period settings will give more overbought and oversold signals and higher period settings will give less signals, however these are considered to be stronger. RSI levels below 30 are considered as oversold conditions and imply that the price should reverse and move up and levels above 70 are considered as overbought conditions and imply that the price should reverse downwards.

How to Trade Binary Options with RSI

When trading binary options, RSI Indicator can help us find profitable entry positions for market reversals in the overbought (above 70) or oversold (below 30) markets and also avoid bad trades in direction of continuation of the trends. By default it is not advised to enter up trades when RSI is above 70, or down trades when RSI is below 30, unless breakouts are being traded.

For more precise trade entries it is advised to combine RSI indicator with other support and resistance indicators, such as manually drawn horizontal support and resistance lines, trend lines or Fibonacci indicator. Understanding price action and candlestick patterns in the RSI overbought and oversold zones can give us strong signals for trading short pullbacks or longer reversal trade entries.

IF YOU LIKE THIS ARTICLE, PLEASE LIKE, G+ or TWEET AND SUPPORT MY WEBSITE

Learn RSI, its Interpretation, Concepts,Divergence,tips to trade

RSI stands for Relative Strength Indicator. It is a momentous oscillator used to identify trend reversal.
Who invented RSI ?
RSI was invented by Welles Wilder Jr.
What is concept of RSI? RSI calculates strength of stock trend and helps to predict their reversals. RSI value oscillates between 0 to 100. As per Wilder when RSI value is above 70 its is considered as overbought and when RSI is below 30 it is considered as oversold. Some traders use 75/25 or even 80/20 to define overbought and oversold.
A value between 35 to 65 is a no entry or exit point for traders who rely on RSI as primary indicator. However their movement can help supplement other indicators signal. Another use of RSI is to determine divergence between price and RSI. Divergence indicates trend reversals.

a. In a downtrend RSI is making higher high and higher lows while price is making lower high and lower lows.
b. In a upward trend RSI is making lower high and lower lows while price is making higher high and higher lows.
Uses of RSI
1.Identify overbought stocks.
2.Identify oversold stocks.
3.Identify trend reversals.
4.Identify direction of the trend .
5.Excellent tools for swing traders .
The above chart is that of Welspun Gujarat Stahl Rohren Ltd. –> Tips to trade with RSI.
1. A general rule of buying when RSI moves from below 30 to above with combination of another indicator like rise in volume or Moving average crossover or any other indicator of your choice.
2. A general rule of selling when RSI moves from above 70 to below with combination of another indicator like rise in volume or Moving average crossover any other indicator of your choice.
3. When RSI trend is falling and price trend is rising and RSI is in overbought state then a reliable sell signal is generated.
4. When RSI trend is rising and price trend is falling and RSI is in oversold state then a reliable buy signal is generated.
5. For those who use end of the day data may profit from RSI in 1-7 days or more days.
6. Less risky traders should wait for RSI move above 30 from below 30 to take a position. Aggressive traders sometimes even take 35/65 as oversold and overbought range.
7. RSI values can be altered for different types of stocks. For extremely stable stocks or small price ranging stocks a value of 35 may be a good entry point and for highly volatile stock a value of 25 may even be considered as high risk.
8. Trend reversal at 70 /30 is considered to be 75% accurate.
9. Trend reversal for divergence is considered to be about 80% accurate.
Divergence looses its significance in sideways market.

Warning

a. Buying stock just based on its value below 30 may lead to losses. In stock down trend RSI may stay below 30 for long time with continuous fall in price.
b. Similar to aforementioned point selling just based on RSI above 70 may reduce your profit.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Free Trading Education!
    Free Demo Account!
    Perfect for Beginners!

  • Binomo
    Binomo

    2 place in the ranking!

c. In extremely strong trend , RSI can yield wrong results.
d. In some cases RSI and price divergence can last for longer time before trend reversal. Traders needs to be patient with it.
e. Not all stock movement will generate RSI buy/sell signals.

Other tutorials related to RSI for better understanding can be found at:
Example/Case Study Trading with RSI divergence Videos

Our website provides free Stock screening based on Overbought/Oversold conditions. It can be found at: 1.Stock screening based on RSI 2.Stock screening based on Stochastic

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Free Trading Education!
    Free Demo Account!
    Perfect for Beginners!

  • Binomo
    Binomo

    2 place in the ranking!

Like this post? Please share to your friends:
Binary Options Online Trading
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: