RSI Trading Rules

RSI Trading Rules

RSI offers three types of trading signals. The strongest is the RSI divergence, then tracing the patterns, then the level of RSI.
Bullish or bearish RSI differences usually occur in large tops and bottoms. They show when the trend is poised to reverse.
A bullish divergence occures when prices fall to a new low, but RSI indicator Sun drop its previous dip.
Buy when the RSI turns in its second dip (after the price reached a new low), and place protective stops below the latest minor low. Buy signals are very strong, if the first bottom RSI is below the lower reference line (usually line 30) and the second is above the bottom line.
A bearish divergence occures when prices hit new highs but the RSI indicator traces a lower peak than the one before it. Sell ​​short when RSI indicator turns down from its second top, and place a protective stop above the latest minor high. NOTE: The diagram above 2 excellent examples of bearish divergences can be found ........ and as a result of the decline that occurred after the first is in the middle of 1998, where prices reached a peak and a smaller peak RSI send If you'd like to have .. sold shortly after the second smaller peak in RSI chances are you have banked big. The next bearish divergence occurs as of this writing. Notice RSI peak in early 1999 and the lower peak, which is formed now. This is a classic RSI bearish divergence and says lower prices could result. Also notice how well RSI indicate where I could find support.
Trendlines, support and resistance, and head and shoulder model works great with RSI. RSI will usually complete these transactions before the price patterns. When RSI breaks its downtrendline, place to buy over Trendline to catch head breakout. When he broke his uptrendline, place in order to sell short below Trendline to capture downside breakout.
When the RSI rises above its upper reference line, it shows that the stock market, or is strong, but its overbought zone and enter the sell. When the RSI falls below the upper reference line sold short.
When the RSI falls below its lower reference line, it is a sign of weakness, but the stock market or oversold and entering the area purchased. Buy when prices rally outside the lower reference line.