How to properly trade with RSI indicator
What is RSI Indicator?
RSI or Relative Strength Index is a momentum indicator that oscillates between 0 – 100. This indicator was developed by J.Welles Wilder in the 1970s. You can check his original work in his book ” New Concept in Technical Trading System”. This book also includes other indicators like Parabolic SAR. ADX ( Average Directional Index) & more.
J.Welles Wilder was a true legend as this book was written in 1978 and his indicators have stood the test of time and are trustworthy. Traders use RSI to find the upcoming bullish or bearish trend. A trend is considered bullish if the Rsi line is below line 30 ( Oversold level ) similarly if the RSI line is above line 70 ( Overbought level ) then the market is considered bearish.
RSI = 100 – 100 / 1+ RS
RS = Average gain / Average loss
If you don’t like mathematics don’t worry, you don’t need to understand the formula as the mathematical work is automatically done by the Expert Option.
How to set RSI on the Expert Option chart?
Firstly, you need to have an Expert Option account. In case you don’t have one click here or you can sign up via the form given below.
Once you click on the link above you will land on the Expert Option home page. then click on the real account, now enter your email password and accept the terms and conditions of the company and click open account. Once you have signed up you see the dashboard of the Expert option.
Firstly to set the RSI indicator click on the indicator button, which is on the top of the left side of the screen.
After clicking on the indicator button you can see the RSI option which is at the bottom of the dialogue box.
If you don’t like the colour of the indicator you can change it and also increase the width of the line.
How to trade with the RSI indicator on the Expert Option?
Trading with an RSI indicator is an easy job you won’t face any issues, while trading with the indicator you need to focus on the indicator line. As said above, the RSI indicator is a momentum indicator that oscillates or moves around between 0 to 100 which helps traders to predict the upcoming trend.
When the indicator line is below 30 or you can call it an oversold level. you can place a buy trade according to the time frame of the chart.
Vice versa, When the indicator line is above 70 or you can call it an overbought level. you can place a sell trade according to the time frame of chart.
Dealing with RSI Divergence
Multiple times in the oscillator indicator you will notice that the price and the indicator line don’t follow each other equally. You will notice that frequent times the indicator line and price are moving in an opposite directions. This usually happens due to fluctuations in the market and this concept is called divergence. During divergence, it is advised to stop trading and wait for the clear movement of the price.
Try the RSI indicator on Expert Option using our free $10,000 virtual clips. I hope this article has helped you.
Till then Best of luck!!