Was first introduced by J. Welles Wilder in 1978 in his book New Concepts in Technical Trading Systems. Rated RSI is in the range 0-100 (the reason why it is classified as a indicator oscillator. Oscillate = range). RSI itself is a momentum indicator that compares the prices between the current value of the attractiveness of the losses occurred.
Applications RSI
RSI can we use to know the following:
Conditions overbought / oversold
Divergence positive / negative
Momentum price movement
Overbought / Oversold the RSI
How to identify overbought condition / oversold with RSI is simple. Simple but not easy. General rules that apply overbought condition is obtained when the RSI line cut 70 and oversold when the RSI line cut 30. And if always 30-70? No. Some books recommend 20-80 and different for each pair we tradingkan. Could be for a particular currency in the overbought conditions, limitations / oversold is on 40-60, so depending on where appropriate. Again, need to be trial and error. However, as a little guidance, RSI will be more accurate to use the market to an efficient and stable. Until now, the market is the forex market the most stable and efficient in pergerakannya (the price is determined more by market and are very liquid). So, a little more restriction 30-70 here is still valid even though not absolute.
Divergence Positive / Negative according to RSI
Just as MACD, RSI can also be used to determine the divergence positive or negative (for the relatives who forget what it means the divergence can be re-read the MACD indicators). How to read any divergence on the RSI is not how to read bebeda with divergence in the MACD.
If the RSI indicator still rising while prices are declining, almost the price can be ascertained that the movement will move the RSI indicator is rising again. Similarly when the RSI are declining and prices are rising, then some time and then move down the price will follow the direction of movement RSI
The Centerline Crossover (Momentum)
As well as the MACD that can be used to measure the strength of momentum increase / decrease in price, RSI can also be used untukhal the same. The difference, if the MACD crossover occurred in the zero line on the RSI line 50.
How to read the strength of a price momentum as the MACD line when the RSI penetrate centerline (line 50) from going down the current trend increase. The amount of momentum comparable with the value of RSI happens. This also applies vice versa.
False Signal on the RSI
Do not use the RSI indicator as you read this section without first! Why? If you're looking carefully enough pictures that I certainly served over some of you ask why there are some circumstances where what the RSI is different from the actual situation?
This is called a false signal alias false signal. If we browse from RSI formula initially can we know bawha basically move with RSI very sensitive. A sensitive indicator that lets us have a lot of "suggestions" to Buy / Sell the indicator concerned. That the benefits. But that is at once a boomerang for us because with the many suggestions that there will be many more opportunities to happen that led to the suggestion to bring big losses.
By many chartist, RSI is not used alone as a main indicator for the nature sensitifnya. RSI is often used as a brace proposed by other indicators.
And what a way to eliminate false signal to the RSI or at least reduce the falsity of the RSI this? There. Of course there is. The most simple way is for the best period in the RSI that we want to use. This process back on trial and error
Nah, the period which is suitable, please specify that you fit the taste of each. If I want to use RSI usually use the period of 10 or 14, but I return again to you as readers.
Alternatively is the nature of sensitivity RSI clipped the parts that are too ringleted RSI. How to provide the RSI penghalus using SMA
