Forex Indicators_1. Forex RSI Relative Strength Index

Lesson 1: Forex RSI Relative Strength Index

The RSI, also known as Relative Strength Index, is an indicator of momentum and it
measures overbought and oversold conditions in the market. The indicator swings
between 0 and 100 - with the values below 30 traditionally showing oversold
conditions in the market - and above 70, overbought conditions.

The indicator also shows the current direction of the trend with values above 50
indicating an up-trend and values below 50, a down-trend.

There are two main ways to use the RSI.

The first one is to trade the overbought and oversold regions. That means you buy
when the RSI is rising back above the 30 level and sell when it’s falling below the 70
level.
The second way to use the RSI is to draw trend lines directly on the RSI to confirm
the momentum of the price. For example; here we are planning to buy the bounds of
the rising trend line. We see that the bullish momentum on the RSI is still intact. So
it’s an extra confirmation that our analysis is right.
Or take a look here. We are looking to buy the break of this falling trend line. As the
RSI has already broken the bearish momentum, we can aim to buy the rate with the
less concern: “the price will make a false break.”