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Technical analysis in the forex market

RSI (Relative Strength Index)

 
Chart  RSI
 

The RSI is the abbreviation of the Relative Strength Index, which is introduced by Mr. Welles Wilder in 1978. The RSI method is one of the Oscillator analysis, which indicates the gapping in the forex market using figures, 0 to 100. Unlike the conventional Oscillator analysis, the RSI method solved the demerit of wrong momentum happening in case of the dynamic movement in the forex market. The RSI is basically used for trend protesting, and it insists on the selling signal when the figure exceeds 70 and the buying signal when it falls below 30.

The formula to calculate the RSI is as follows;

RSI = 100 - ( 100 / ( 1 + RS ) )
RS = Average of inclining prices for X days / average of declining prices for X days

You can tune fine by means of changing the number of days. Initially, Mr. Wilder mainly used 14 days for RS calculation, and he sometimes used 9days in other cases. The RSI based on the shorter term is more sensitive to the forex market than the longer one. You had better choose the most suitable type for your own forex trading.

Display of daily chart and RSI

 

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