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Automated-Trading
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Automated-Trading 2012.09.17 09:57 

MARSICD:

Trend indicator based on two RSI oscillators.

MARSICD

Author: Nikolay Kositsin

Sergey Golubev
Moderator
55305
Sergey Golubev 2014.02.03 06:42  

Relative Strength Index (RSI) in Forex Trading (based on dailyforex article)

The Relative Strength Index (RSI) is a momentum oscillator, which is used for technical analysis in the forex market. Momentum oscillators such as RSI are usually used in a ‘sideways’ or ‘ranging’ market, where the price moves progressively between the support and resistance levels. It is a leading indicator, and hence used on account of its wide applicability. It is usually calculated for 14 periods, although the number of days or other period in question can be modified to suit a trader’s specific style.

Overbought and Oversold

Like other momemtun oscillators, RSI moves in a predefined range, although the signal lines are considered to be the 70% (overbought) and 30% (oversold) lines. The overbought region refers to a situation where the market has moved into significant buying pressure, relative to the recent past. It often signals that an upward trend is about to come to an end. Similarly, the oversold region refers to the lower region, which suggests significant selling pressure relative to the recent past, and is indicative of an end to a downward trend.

Basic Trading guidelines

  • Go short when the indicator moves from above, to below the overbought line.
  • Go long when the indicator moves from below, to above the oversold line.
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