The term Relative Strength Index (RSI) is a pointer that is often used to assess the intensity of the tendency and the likelihood of the originating exchange. Recently, the RSI pointer has been rated as one of the most profitable indicators in the trading market.
The value of the pointer can be exchanged and sold in highly intensified values. Thus, in order to maintain RSI profitability, it is not proper to engage in commercial activities when the pointer has been excessively purchased or excessively sold.
When this happens, the value will clearly demonstrate the current drift, whereas the pointer sign is often limited in the conflicting directions of the drift indicating that the point is at the terminal.
The RSI acts as a tuned electronic circuit used to generate a continuous output and returns to its initial state in the same orientation and position after a finite number of generations. For instance, it can change within the range of 0 and 100 heights.
The heights over 70 levels are the excessively purchased height whereas the height underneath the 30 levels is the excessively sold height, this concept often makes RSI be referred to as an oscillator.
Another indicator mostly used is RSI, 5 Exponential Moving Average, 12 Exponential Moving Average popularly referred to as RSI + 5 MA + 12 MA trading strategy.
These moving Averages have unique features that classify them as one of the most widely used tools. It is often used in pointing the drift to various ways involving other anticipated exchanges that may result in setbacks.
Let’s take a look at the basic features of RSI + 5 MA + 12 MA trading strategy
The minimum duration for this indication is ten minutes to about one hour depending on the trader while the maximum timeframe for test running is about twenty to thirty minutes.
Another option is the Currency pair which may be selected from the available list but mostly EURUSD can be suitable for this illustration.
Then after selecting the option Stop Loss/Take Profit with a preferred choice of about 15/30 pips with other easy processes to serve as a guide.
RSI + 5 MA + 12 MA trading strategy
These trading strategies are more applicable and possess extended laws which are preferred for trading activities. This is applicable to the long trade entry laws.
To trade RSI profitably, the 5 MA must intercept with the 12 MA at the upside. This acts as a stipulation for a signal of the achievable setbacks into the upturn and should cross the 50 flat lines upwards.
At the point of the candlestick when the two opinions intersect, the trader should press or choose Buy trade.
Short trade entry laws can also be applicable and explained as follows:
5 MA can cross the 12 MA to the downside, stipulation a signal of the achievable turnaround within the downtrend of the level. RSI can intersect with the 50 flat or level downwards at the candlestick when the two opinions have formed a cause of intersection and the input of the word enters the Sell trade.
* 50 trades for the Training Set and 20 trades for the Forward Testing.
RSI indicator can be used with other indicators but the truth remains that RSI is one of the most preferred trading tools because of its simplicity. The RSI indicator is called an oscillator trading tool capable of accomplishing timely trade indicators.
Traders use the centerline to control the gradual shifts in the drift for example assuming the value of the RSI is beyond the average of 50 to 60, then impetus will be reflexed upwards and traders will quickly use this shift to their advantage by buying more opinion in the market and vice versa.