technical analyst-RSI

Subject uses, RSI can we use to know the following things:

1.divergence positive / negative

2. The momentum of price movement

3. Condition overbought / oversold

But among the three uses above, uses the former is most often used by traders mainly because of the simplicity so that interpretation can not be RSI from one trader to another trader.

How to identify the condition of overbought / oversold with RSI is very simple. Simple but not necessarily easy. The general rule that applies is overbought condition is obtained when the RSI crosses 70 and oversold when the RSI crosses 30. Some books also recommend the 20-80 as the limit of OB and OS. It could be for a specific currency restrictions under certain circumstances overbought / oversold levels are at 40-60, so depending where appropriate. Again needs to be done by trial and error. However, as a little guidance, the RSI will be more accurate to use on the market conditions for efficient and stable. Until recently, the forex market is the market's most stable and efficient in its movement (the price is determined by the market and highly liquid). So, in a 30-70 limit still applies here, although not absolute.

The Centerline Crossover

As well as the MACD can be used to measure the strength of the momentum of increase / decrease in price, the RSI can also be used untukhal same. The difference is when the MACD crossover occurs at the zero line on the RSI on line 50.

How to read the strength of the momentum of a similar price as the MACD that is when the RSI line through the centerline (line 50) from below the going trend. Large amount of momentum is proportional to the RSI value that occurred. Likewise, the opposite applies.

false signals in the RSI

This is called false signals aka false signals. If we trace the early RSI formula we can know bawha basically RSI moves with very sensitive. A sensitive indicator allows us to have a lot of "advice" to buy / sell according to the indicator concerned. That advantage. But it becomes at once a boomerang for us because with the increasing number of suggestions that there will be more and more opportunities to place a misleading suggestion that brought huge losses.

By many chartist, RSI is not used by itself as a leading indicator because it is sensitive nature. RSI is more often used as a booster recommended by other indicators.

So is there any way to eliminate false signals on the RSI or at least reduce the artificiality of the RSI is this? There. Of course there is. The simplest way is to find the best period on RSI that we wish to use. As we all know that the greater the period of an indicator of the nature of the sensitivity will be increasingly bekurang. This also applies to RSI so that we can use the RSI with the period slightly larger than normal is 14. Or can also use the above period, such period of 18.

Well, whichever period is appropriate, please specify according to your individual taste. Learn Forex own if you want to use RSI usually use a period of 10 or 14, but I return again to you as a reader. Another way again is to reduce the sensitivity nature of RSI with RSI trim parts that are too curly. You do this by providing on using SMA RSI.