Strategy: How to use the RSI (relative strength index) indicator

This video demonstrates how to use the RSI (relative strength index) indicator to trade currencies, commodities, futures and indices. The RSI indicator is easy to use and available in most trading platforms.

If the RSI is 70 or higher, the currency pair is considered to be overbought (selling signal). If the RSI is 30 or lower, the currency pair is considered to be oversold (buying signal). These signals can be trustworthy in a market without any definite tendency and over shorter periods. If the market is in an upward trend, it is recommended that you use buying signals when the RSI is lower than 30 and do the opposite when the market is heading downward.

Another way to look at the RSI, according to Mustapha Belkhayate (a well known fund manager in Europe), is to draw 4 lines, at the 20, 40, 60 and 80 marks. When price is evolving in a tunnel between lines 20 and 60, this means you're in a bear market (you're looking for selling opportunities). Just the same, when price is moving through a channel contained by lines 40 and 80, you're looking to buy.

This video offers yet another way of looking at the RSI index. Try it out on your platform. This is one of the more powerful indicators out there.