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RSI is one of my favourite indicators that I am personally using since I started trading. This indicator is really easy to use but really effective and can give you a lot’s of bucks. So, let’s check out the RSI indicator.
How to Setup RSI on Pocket Option?
Once you have logged in to your Pocket Option account now click on the indicator button on the left-hand side corner and select RSI from the menu.
You can change the colour of RSI by clicking on the pencil near the indicator. and select the light colour for better visibility. Here, I select a white colour for the RSI mainline.
What is RSI?
RSI or Relative Strenght Index is a technical indicator used in the Financial market. This indicator helps us to make the buy or sell trade of security based on the closing prices of the recent trading period.
This indicator was developed by one of the most famous names in the field of trading name J. Welles Wilder. He has invented many popular indicators like ATR, ADX & more. This indicator oscillates between 0 to 100. The traders most typically use this indicator on 14 days timeframe with the high and low at 70 and 30. Where If the security is above 70 the market is said to be at an overbought level Similarly, If the security price is below 30 the market is said to be trading at the oversold level.
How to trade with RSI?
Trading with an RSI indicator is like making a cup of tea because it’s so easy. You just need to understand the basics of Rsi as this helps us to identify the trend using the Overbought and Oversold levels. When the security price is trading near or below the RSI line 30 It means that the market is bullish and here we can make a buy trade. Similarly, When the security price is trading near or above the RSI line 70 it means that the market is bearish and here we can make a sell trade.
Make Buy trade with Oversold level
When the security price is trading near or below line 30 it means that the market is bullish and here we can make a buy trade.
Similarly, When the RSI line is near or above line 70 it means that the market is bearish and here we can make a sell trade.
How to Trade with RSI Divergence at Pocket Option?
Trading with the RSI indicator is very easy. However, If you study the indicator properly you will notice that the RSI does not always follow the price ups and downs. Multiple times you will notice that the indicator is moving to the opposite of the security price and this is called Divergence.
In Divergence, You will notice that the price is moving in the downtrend while the indicator is moving in the uptrend. Similarly, When the price is moving in an uptrend while the indicator is moving in the downtrend.
As you can see above the price is moving down but the RSI line is stepping up. It means that buyers are trying to push the market up.
So, I have done my part. I have covered everything that was really important for RSI.
However, If you planning to use Support and Resistance or Stochastic indicator for trade confirmation that won’t be a bad idea.
If you really want to understand How this indicator really works. I will highly suggest you to practice the RSI on the Pocket Option practice account and keep a track record of how many correct trades you actually made and I wish you a happy trading.