Use The Magic Of RSI To Beat Market Trends

RSI (Relative Strength Index) is a Momentum Oscillator. It indicates whether a market is losing or gaining its momentum in the current direction. If used correctly in association with other tools, we can use RSI To Beat Market Trends.

Usually RSI is usded in 3 ways. But to produce best results, a trading strategy must make use of other tools and use RSI as one of the additional indicators to give confirmation. This is because of the fact that RSI can stay at a level for a long period of time while price is still moving.

1. Overbought/Oversold Conditions
   1. RSI crossing over 70 level is considered as Overbought

      

   2. RSI crossing below 30 level is considered as Oversold

      

2. Divergence (Loss/Gain of Momentum)

   

   Price Action	RSI	Expected	Type
   Making Lower/Equal Lows	Making Higher Lows (Gaining Upward Momentum)	Bullish	Regular
   Making Higher/Equal Highs	Making Lower Highs (Losing Upward Momentum)	Bearish	Regular
   Making Higher/Equal Lows	Making Lower Lows (Losing Downward Momentum)	Bullish	Hidden
   Making Lower/Equal Highs	Making Higher Highs (Gaining Downward Momentum)	Bearish	Hidden

   

3. Center Line Crossover
   1. Bullish above 50:
      1. Not very reliable so other factors/tools need to be added to produce better results.
      2. A cross over 50 level RSI downwards indicates bearish move.

         

   2. Bearish below 50
      1. Not very reliable so other factors/tools need to be added to produce better results.
      2. A cross over 50 level RSI downwards indicates bearish move.

         

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