RSI trend lines

RSI trend lines

With the RSI trend line Forex traders are able to receive much earlier warning of upcoming trends change from RSI trend line breakout witnessed several candles from the table earlier trend lines.
RSI trend lines are particularly useful for large time frames.
Trading divergence with RSI indicator
Another way to use the RSI trend lines is to take advantage of RSI divergence signals.
When the RSI trend lines approaches 30 looking bullish divergence => slowly rising RSI versus already reduced prices.
When the RSI approaches 70 traders watch for bullish divergence, which occurred when the real RSI trend lines readings begin to decrease, while prices continue to climb. RSI divergence suggests that the present moment is over and traders should look to protect their profits and be ready to trade in the opposite direction.

The best way to learn about any indicators to read the original works of their creators.
Therefore, let us turn to the book where JP. Wells Wilder tells about his research on the RSI trend lines indicator:

"(3) If the Playground: Failure swings above 70 or below 30 are very strong indications of market reversal (see Fig 6.3 and 6.4 Fig ..)."

RSI trend lines divergence explained

"(5) divergence. Although the divergence does not occur at every crossroad, it does not happen in the most important turning point where divergence begins to show up for a good direction, this is a very strong indication that a turning point is near. Divergence is unique most indicative characteristic of the Relative Strength Index.
RSI indicator Formula

RSI = 100-100 / (RS + 1)

where:

RS = Average Price Change Up / Down Average Price Change

Average Price Change Up = [(previous Average Price Change Up) x 13 + current perspective change] / 14
First up Average = Total Change from the perspective changes over the past 14 periods / 14

Average Price Change down = [(previous Average Price Change down) x 13 + current downward change] / 14
First Change Down Average = Total of perspective changes over the past 14 periods / 14

For calculating downward price changes are taken as positive values.






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The traditional use of the RSI indicator
The traditional use of the RSI indicator to say when the exchange market is overbought or oversold when it is, any reading below 20 indicates that the market is oversold and any reading over 80 indicates that the market is overbought.

Formation gap.
Seeing the Formation gap created at the beginning of this trend shows a reversal of direction, buyers are involved with a great amount of zeal.

Dynamic Doji - Reversal clear trend signal
The Doji - Reversal, appearing at the end of an extended trend, has significant implications.

Periods in the RSI calculation
Internal Strength Index may be more appropriate name. Two market indexes, which are often known as Comparative Relative Strength are compared with the relative strength scale.

How to Use the RSI Indicator light
Keep in mind though, that a longer period, your RSI indicator, the less often it will give signals for trading, although the signals that could not be considered reliable.