Trading with RSI

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cd173

Active member
Sep 22, 2003
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London
#1
Hello

Can anyone give me a very quick explanation on how to trade using RSI? I tend to use Japanese candlestick techniques with the Pristine method. However the FTSE is somewhat quiet this morning and I was wondering if RSI is maybe better for this

Many thanks to anyone who can help!
 

Grey1

Well-known member
Jun 11, 2002
2,185
175
73
#2
RSI is the relative strength of a instrument compare to ITSELF few bars back (intra day trading )
The default setting for RSI is 14 which means the instrument is at better value compare to 14 days ago , which might not be compare to 15 days ago (LOL)..


If you have decided RSI is the right indicator for you then it makes more sence to use this indicator in MULTI time frame as follow

Chart three RSI's all on top of each others and the settigs are 8, 13 and 21.. These are called Fibonacci numbers or Fib Numbers and suppose to refelect some retracement levels ...

your signals come from when all three indicators turn to up/down at the same time ..


YOU ARE FAR BETTER OFF TO LOOK AT THE RELATIVE STRENGTH OF THE INSTRUMENT YOU WANT TO TRADE TO A LEADING INDEX SUCH AS SP500 FUTURES
 
Dec 30, 2002
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#4
You could look to buy when the 14 RSI passes below 30-25 (oversold) and look to sell when it passes above 70-75 (overbought) as there is a good chance that a reversal - be it a substantial reversal or minor reversal - is about to happen.
 

Wideboy

Active member
Oct 2, 2001
489
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#5
But then if the market is trending you often see a sizeable move once these extremities are reached so could easily get caught out! Best to wait for the indicator to move back below 70-75 from above to sell, and above 20-25 from below to buy.
Oh the joy of indicators ...
 
Dec 30, 2002
5,741
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#6
Good point Wideboy, when the RSI starts to move in the opposite direction by passing back up through 30 it can show that the price fall has been stabilised and may be reversing, and the same when it passes back down through 70.
 
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