Close Menu
Basic Finance Care
    What's Hot

    Thinking About Investing in Precious Metals? Here’s Your Easy-Peasy Guide!

    June 30, 2025

    Mississauga Real Estate in 2025: A Smart Buyer’s Guide to the City

    June 14, 2025

    Don’t Trade CFDs Without Reading This First: How to Pick the Right Broker

    May 26, 2025
    Facebook X (Twitter) Instagram
    Basic Finance CareBasic Finance Care
    • Home
    • About Me
    • Hire Me
    • Contact
    • Submit Guest Post
      • Blogs Accepting Guest Posts
    Facebook X (Twitter) Instagram
    Basic Finance Care
    Forex Trading

    An Introduction to the Relative Strength Index in Trading

    James PaulBy James PaulMarch 22, 20213 Mins Read
    Strength Index in Trading
    Share
    Facebook Twitter LinkedIn Pinterest Email

    Have you heard other forex traders using the term RSI and wondered what they were talking about? If so, your curiosity can pay off if you learn not only what the RSI indicator is but how to use it effectively in your day-to-day transactions. Truth be told, this handy math-based formula is a powerful tool for traders of all types, not just those who buy and sell currency pairs. You can look up a definition and learn that the letters stand for relative strength index, but if you want to dig into the mathematics behind the formula, you might come away even more confused. The quickest way to acquire an understanding of how to actually use it in your own trading is to look at four key facts below.

    It Measures Momentum

    The first point to absorb is that the relative strength indicator is mathematically designed to measure price momentum. It’s obvious that the prices of almost every currency pair rise and fall constantly, but wouldn’t it be nice to know how strong those rising and falling tides are? That’s what RSI measures, and it does it with a factor between 0 and 100.

    An Example of the 70/30 Rule

    A real-world example is to suppose you look at a chart for ABC Corp. share prices, or the current price of your favorite forex pair. You can enable the RSI indicator on the chart to see the relative strength values underneath the main chart. If the current RSI factor is above 70, the market is said to be over-sold, or getting ready to drop. A value below 30 reveals a market that is over-bought, or about to experience a rise in prices.

    The Nuance of the 70/30 Rule

    Here’s the nuance of the above rule, and you can test it out for yourself on pricing charts for stocks, precious metals, or currency pairs in forex trading with brokers like easy Markets. An RSI above 70 means there is strong momentum that is about to peter out. But, when will that be? Likewise, a value below 30 means prices are set to rise soon, but how soon?

    You can usually get a clear answer to those two questions of timing by waiting for the RSI line to puncture the 30 or 70 threshold and enter the middle zone of the chart. For instance, let’s say you’re observing XYZ Corporation’s chart and notice that the relative strength line has been above 70 for several weeks, indicating that prices are getting ready to fall. Many traders won’t sell until the factor breaks below the 70 mark and begins to travel downward. That’s the nuance of knowing how to use this indicator for sell and buy signals. Note that a buy signal would be when the indicator is below 30 for a while and ten breaks through and above 30, headed upward.

    RSI is Best Used with Other Indicators

    If you combine other data with relative strength, you can get confirmation of trend direction much more easily. Typically, people use relative strength with moving averages or any of a dozen or so other indicators to gain a clearer picture of price behavior.

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

    Related Posts

    Selection Procedures of the Best Forex Brokers

    February 11, 2021

    Finding Serenity Like the Elite Forex Trader

    February 11, 2021

    Factors Which You Can Control at Trading

    January 21, 2021
    Latest Posts
    Real Estate

    Thinking About Investing in Precious Metals? Here’s Your Easy-Peasy Guide!

    June 30, 2025

    With inflation hanging around, a lot of people are turning to things like gold and…

    Mississauga Real Estate in 2025: A Smart Buyer’s Guide to the City

    June 14, 2025

    Don’t Trade CFDs Without Reading This First: How to Pick the Right Broker

    May 26, 2025

    Swipe Smart: The Business Owner’s Guide to Lowering Card Processing Fees

    May 26, 2025

    Banks Keep Saying No? Try These Easy Tricks to Get Your Personal Loan Approved Fast!

    May 17, 2025
    Stay In Touch
    • Facebook
    • Twitter
    • Pinterest
    • Instagram
    • YouTube
    • Vimeo
    Ads
    Budget Management

    How to Live an Efficient Budget?

    Investment Planning

    Get Help Choosing an Investment Account With a Financial Advisor

    Business

    Commercial Projects- Leads the Way

    Life Insurance

    The Most Common Mistakes When Shopping For Life Insurance and How to Avoid Them

    Budget Management

    Secrets of Personal Budget Management

    About Us

    I’ve managed to graduate college free of student loans. My mission is to make people understand importance of money management and take sound financial decisions.

    This blog is my attempt to help to be prudent while dealing with saving, debt, credit, investment, insurance, spending or any financial issue. I am here to make your financial life to be sound and secure.

    If you like the articles posted here and interested to hire me for your content writing projects, feel free to contact me.

    Our Picks

    Thinking About Investing in Precious Metals? Here’s Your Easy-Peasy Guide!

    Mississauga Real Estate in 2025: A Smart Buyer’s Guide to the City

    Don’t Trade CFDs Without Reading This First: How to Pick the Right Broker

    Picked for You

    How to Avoid Bankruptcy?

    Considering Easy Finance Sydney Loans For Your Emergencies

    Buy Land Now, Build Your Home Later

    Type above and press Enter to search. Press Esc to cancel.