Forex Indicator RSI – Relative Strength Index
Get to know the Forex Indicator RSI
The RSI indicator or abbreviation of relative strength index is one of the Oscillator indicators used in forex trading. This RSI indicator measures the saturation of the condition of the price trend with a range of 0-100 values. This indicator was first introduced by J. Welles Wilder in about 1978.
In theory the RSI is used to measure Overbought conditions or overbought when the value is above level 70. Whereas to measure Oversold or oversold conditions when the value is below level 30. But there are also many techniques using the RSI indicator using levels 20 and 80 to measure Price conditions depend on the trading style used (long / short term, big / small time frame).
Usually when the price has reached the Overbought condition the price will turn down because it is overbought. Conversely when the price has reached the Oversold condition the price will turn up because it is oversold. That’s a simple way to read oscillator type indicators, one of them is this RSI.
How to Use the RSI Indicator
Using the relative strength index indicator to measure price movements is very simple, which is like:
In most cases the price will usually move down again when the RSI value is above the 70/80 level and the line looks down.
Oversold is when the RSI value is below the level of 50 and looks towards the level of 30 or 20. In most cases the price will usually move back up when the RSI value is above the level of 20/30 and the line looks up.
In addition, the RSI indicator can also use the Divergence technique. Even though there are many Divergence traders using the Stochastic indicator, Oscillator type indicators such as RSI are also very good at providing Divergence signals.