Things You Can Learn to Earn From RSI, the Relative Strength Index
What do you know about the indicator or set of indicators that you use when trading Forex? Have you actually made a list of the things that they tell you about what price is going to do? When was the last time you knew with a better than 70% chance that price was going to go in the direction you predicted and you knew why?
Having been a serious student of RSI, the Relative Strength Index for a number of years I have learned a great deal about how this indicator helps reveal what the future holds.
First, the RSI is a momentum indicator or oscillator. That means it measures the momentum of price over a certain period of time. The default value of most RSIs is 14 periods. Understanding momentum is crucial for traders as it is momentum that provides the directional force when a trade is entered.
Second, RSI measures accurately two kinds of momentum; Momentum Type 1 which is Retracement Momentum and Momentum Type 2 which is Continuation Momentum. This kind of momentum puts you in position to trade Momentum Type 3 which is the "directional force" of the market and is the momentum you need to earn money.
Third, RSI Momentum Types 1 and 2 are signaled by 4 kinds of trading signals called divergences (bullish and bearish) and reversals (bullish and bearish). Depending on the type of trend, these signals determine the momentum set up necessary to be ready for Momentum Type 3.
Fourth, Momentum Type 3 is the momentum that can be located with high probability using statistical data from previous trade signals in particular time and RSI location.
RSI also has what is called a Range Shift when prices change direction and it also trades in an RSI Range when it is trending up and down.
Understanding these principles allows a trader to use on indicator that provides highly accurate trades. One little known fact about multiple indicators is that the only indicator on a trading chart that matters is the one that gives you the most consistent signals. If that is 52% of the time and all the rest are less, than regardless if they are confirming, your best indicator is the 52% indicator. There is only confusion my using the others. That includes trend lines, moving averages, other indicators that monitor price, Fibonacci, Elliott Wave, etc.
Learn to take one indicator and find out everything you can about it until it begins to serve your trading needs. RSI is one of those indicators. I know, as many traders I have taught are now making money.
Questions and Answers
When I started in Forex, I wouldn't have known a good Forex trading system if it had walked up and slapped me in the face. Would you? Many traders I talk to have studied trading for many years, have taken expensive courses on how to trade, spent more money on trading systems, read many books, traded hundreds of hours if not thousands and still lost money.
When I first started trading Forex I spent hours drawing trend lines trying to figure out what price was going to do. I read everything I could about trend lines but no matter how I drew them or how many I drew, prices never seemed to obey them.
I trade Forex everyday and I teach Forex everyday and the most significant thing that helps losing traders become winning traders is reducing the number of indicators on their charts, learning to trade 4 RSI signals and understanding that a trade without momentum is not a trade.
Can you imagine trading and seldom getting a trade wrong? Can you imagine that it happened at about the same time each day so you didn't have to sit in front of your computer and watch hour after hour? Better yet can you imagine trading and getting the direction of the trade right more often than you got it wrong and that when you entered a trade momentum in the market immediately moved price in the direction of your entry and put you in profit?
Is it possible to trade one hour a day in Forex and make money? Many people who want to trade Forex don't have the time to trade all day or even part of the day. So can you trade one hour a day and make money, perhaps enough money to live on?
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Created by David Lambert, the CCI was first used as an indicator for determining reversal points in the Commodities Markets. It was then discovered to be very useful in the share and forex markets. It is based on the theory that all activities move under the influence of cycles. The Maxima (+100) and the Minima (-100) occurring at regular intervals. The CCI measures the speed of price fluxuations as determined by oscillators.
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A merchant cash advance is a cash payment to a business in exchange for an agreed upon percentage of future credit and/or debit card sales. This relatively new industry provides business owners quick access to capital coupled with benefits not see with traditional loans.
When I first started trading Forex I spent hours drawing trend lines trying to figure out what price was going to do. I read everything I could about trend lines but no matter how I drew them or how many I drew, prices never seemed to obey them.
When I started in Forex, I wouldn't have known a good Forex trading system if it had walked up and slapped me in the face. Would you? Many traders I talk to have studied trading for many years, have taken expensive courses on how to trade, spent more money on trading systems, read many books, traded hundreds of hours if not thousands and still lost money.
Not everyone plays baseball that trades Forex but they have a lot in common. To become a good trader in Forex you have to think like a good hitter. Good hitters have a "best" pitch to hit. They also have a pitch that is "almost best" and then it goes down from there.
Depending how you started in Forex and depending on your method of trading, you may have begun to trade live already. But if you haven't traded live and you are wondering when the right time would be, perhaps this article will be of help.
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