8. Relative Strength Index

 About its use, RSI can we use to know the following things:

positive/negative Divergence
Momentum
overbought Condition price movement/

oversold But among these three usability above, the usefulness of the first most often used by traders mainly because of the simpleness of the side so that the interpretation of the unbiased one RSI trader with other traders.

Ways of identifying overbought/oversold conditions with RSI is very simple. Simple but not necessarily easy. A general rule that applies is overbought conditions is obtained when the RSI line cut 70 and oversold when the RSI line 30 cut. Some books also recommends 20 to 80 as the limitations of OB and OS. It could just be for a particular currency in certain circumstances limit the overbought/oversold is at 40-60, so hinge where appropriate. Again to do trial and error. However as little guide, RSI will be increasingly accurate use on the market conditions of efficient and stable. Until now, the forex market is a market which is the most stable and efficient in its progression (more price determined by the market and highly liquid investments). So, more or less 30-70 restrictions still apply here though is not absolute.
False Signal on RSI

do not use as an indicator of RSI You without reading this part in advance!! Why? If you're pretty closely pay attention to the pictures presented above is surely some of you ask, why there are some circumstances where what is said to be different from the circumstances that the RSI is actually

? This is called a false signal signal false aliases. If we trace the formula of RSI can initially bawha we know basically the RSI moves with very sensitive. A sensitive indicator enables us to have a lot of "suggestion" in order to Buy/Sell according to the indicators in question. That's the upside. However it also became at once the boomerang for us because with the growing number of the suggestion that there will be more opportunity for misleading argument ensued that brought great loss.

By many chartist, RSI is not used alone as a leading indicator because of the nature of that sensitifnya. RSI is more often used as amplifier the suggestion by other indicators.

Then is there any way to eliminate the false signal on the RSI or at least reduce the error the RSI? There are. Of course there is. The simplest way is to find the best periods in the RSI shall we use. As we know that the greater the shared period of an indicator then the nature of sensitivity will be more bekurang. This also applies on the RSI thus we can use RSI with a period of slightly more than usual that is 14. Or can also use periods above it, for example the period 18.