RSI , Using it for Forex trading

The Relative-Strength-Index (RSI) is actually an oscillator for momentum that measures the pace and changes in prices. RSI oscillates from 0 to 100. Traditionally, and in accordance with Wilder, RSI is recognized as overbought when it is more than 70 and oversold when less than 30. Signals may also be created by looking at divergences, failed swings and center line crossovers. You can also use RSI to recognize the typical pattern.

RSI Computation:

RSI = 100 – (1oo/ 1 + RS)           RSI for Forex

Where    RS = Average Gain / Average Loss

A bullish divergence occurs when the underlying-security creates lowest low and RSI reaches higher point. RSI will not confirm lowest low which signals stronger momentum. The bearish divergence takes place when the underlying-security makes higher tops and RSI creates a lowest tops. RSI does not confirm the newest high and this demonstrates weakening momentum.


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