Saturday, 9 November 2019

How to analyze EUR / GBP with RSI

As you have read and learned about RSI in the previous article, it is explained that RSI is an oscillator indicator that is used to identify changes in price movements. The author is a trader named J. Welles Wilder and was developed for the first time around 1970. The main function of the RSI is as a determinant indicator of overbought and oversold. To make it easier for you to understand how to analyze markets using this RSI indicator, we will make a visual illustration. For example, below is the price movement of the EUR / GBP currency pair in an 8-hour time frame.



In accordance with the visual chart, it appears that EUR / GBP has decreased by as much as 1312 pips, over the past twelve months.
The question is, how can an RSI indicator help you determine the next trading direction? How to Use the RSI Indicator Before you learn how to determine the direction of trading by utilizing the RSI indicator, the first thing you need to understand is how the RSI gives trading signals to traders.

 Generally, RSI settings are always in the default set, which is in period 14. Meanwhile, for the rule of the signal, which is referred to as overbought on the RSI is a chart that is above 70, while oversold is below 30. When trading using the RSI indicator, then The entry point rules are: Buy when the market is oversold. Sell ​​when the market is overbought. EUR / GBP analysis with RSI Pay attention to the EUR / GBP chart which has the RSI indicator installed with the following default settings.

In the case of trading this currency pair, what we need to prioritize is an overbought signal, because the ongoing trend is prolonged bearish. Before making a sell, pay close attention that the movement of the RSI indicator exceeds the value of 70. If a trader manages to find a chart movement that exceeds the value of 70, then preparation for an open position can be done immediately. For longer term trading, we can also increase the timeframe of monitoring the EUR / GBP pair that we use. For example, become a Weekly or Monthly timeframe.

Also Raed : Trading Method with Price Action

If you look at the EUR / GBP chart, there are three entry signals based on the RSI indicator, for the past 1 year. Although it is not a large number of trades, it is clearly seen that this RSI indicator is able to help traders to determine the right time for entry.

As a confirmation in trading using the RSI indicator, you can also complete it by memorizing a number of important candlestick patterns that may appear together with overbought and oversold conditions. Among them, reversal type candles such as Hammer as a complement to oversold signals. Then there is also the Shooting Star or Hanging Man candle to confirm the overbought condition.

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