22.How to Trade the Relative Strength Index (RSI) Like a Pro

www.informedtrades.com — Home of the largest free university for traders A lesson on how to trade the RSI for traders and investors using technical analysis in the stock market, futures market and forex market. In our last lesson we looked at 3 different ways that the MACD indicator can be traded. In today’s lesson we are going to look at a class of indicators which are known as Oscillators with a look at how to trade one of the more popular Oscillators the Relative Strength Index (RSI). An oscillator is a leading technical indicator which fluctuates above and below a center line and normally has upper and lower bands which indicate overbought and oversold conditions in the market (an exception to this would be the MACD which is an Oscillator as well). One of the most popular Oscillators outside of the MACD which we have already gone over is the Relative Strength Index (RSI) which is where we will start our discussion. The RSI is best described as an indicator which represents the momentum in a particular financial instrument as well as when it is reaching extreme levels to the upside (referred to as overbought) or downside (referred to as oversold) and is therefore due for a reversal. The indicator accomplishes this through a formula which compares the size of recent gains for a particular financial instrument to the size of recent losses, the results of which are plotted as a line which fluctuates between 0 and 100. Bands are then placed at 70 which is considered an
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26 thoughts on “22.How to Trade the Relative Strength Index (RSI) Like a Pro

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  3. Another great video Dave!

    I must admit I have found the RSI to be very useful as a confirmation with my strategies entry points. I use it with bullpips (search “bullpips” on google) and it has increased my strike rate to about 75%!

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  6. In general the most reliable period is the 1 day chart. Finding the reversal is a matter of trend trading. You should trade trend by checking multiple time frames, ex. 1 day and 1 hour; if the trend is moving in the same direction, you should trade the trend, if the shorter timeframe is moving in the opposite direction than the long time frame, you are about to see a trend reversal.
    The best way in my opinion is to trade the RSI crossover on the 1 day chart.

  7. Dave, is it true that you could have overbought signal for say, a 5 day trading period but for the last 6 months have an oversold indication?

  8. would it make sense to only use the rsi as a confirmation to another indicator, like today I was watching apple and there was a crossover with the 50 day and 200 day moving average which looked like a good time to short and so it did fall, and the rsi at the time was around 60. Then as it was falling it eventually hit 25 on the rsi with a drop of a $1.50, so this could be a good time to cover your trade and it did start to go back up after it hit this 25 point on the rsi.

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  11. You really have a large collection of brown shirts Dave!

    I’ve just finished reading Technical Analysis of the Financial Markets and your videos are a great follow up!

  12. 1. Can i use this oscillator for intraday trading?
    2. If i use, which is the best time period to trade in intraday 14,30, 40?

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  15. Nice read, I just passed this onto a friend who was doing some research on that. And he just bought me lunch since I found it for him smile Therefore let me rephrase that: Thanks for lunch!

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