Good Morning Dynamic Traders"Better to have tried and failed, than not tried at all"
Cross = EURGBP : Day Chart (Posted Below)
Long Term Trend = UP : Short Term Trend = Down
I am writing this awaiting the next candle on the daily chart, I think it might be stuck in the snow we had today, causing the whole country to come to a stand still. Those of you who read today's blog would have been rewarded well, as the current candle was full of 268 pips. so anyone securing 100 pips or more has done well.
My next day candle has arrived with early indication of further bullish movement, favoured by stochastic s and remembering the trend is up.
I said last night I wanted to cover RSI in more detail tonight, so here goes.
RSI is a momentum indicator and falls in the lagging bracket.
It measures the recent Gains vs Losses over the chosen time period.
Its usual setting is over a 14 time period where it plots a line on a graph between 0 - 100 and uses 70 as its higher band and 30 as its lower. Price above 70 is deemed over bought and below 30 over sold.
When the price crosses the top or bottom line it does not mean the price has peaked as the momentum will continue for a while. You should take more notice when the price turns back to finish in the middle band crossing its relevant marker line.
We normally have a centreline between the 70/30 @ 50.
There is 3 ways to use the RSI
1. Over bought = +70 , trade the turn of the trend
Over sold = -30 , trade the turn of the trend
2. Centreline crossing, Cross up = Bullish, Cross down = Bearish. Both less reliable, use in conjunction with other indicators.
3, Divergence - Opposite direction of the price, show possible reversals.
Points to note:
Works better with larger time frames, small time frames tend to stop you in and out to much.
You will see from the chart below, examples of
Overbought through 70 and turning back down giving 400 pips and 1000 pips respectively.
Divergence giving a move of 600 pips
RSI not the be all and end all, however a favourite in my bag.
Courtesy of Advanced Get / E SignalTrade with PassionJohn MaherForex Analyst