RSI MT4 Stock Indexes Indicator and RSI Indices Trading Signals
Developed by J. Welles Wilder, described in the book “New Concepts in Technical Trading Systems”.
Relative Strength Index is the most popular indicator and it is a momentum MT4 Stock Indexes Indicator and a indices trend following indicator. RSI compares a trading stock indexes price of the recent stock indexes price gains against its magnitude of recent losses stock indexes price losses and plots this data on a scale of values that ranges between 0-100.
Relative Strength Index measures the momentum of indices; values above 50 signify bullish momentum while values below 50 center-line signify bearish momentum.
- RSI is drawn as a green line
- Horizontal dashed lines are drawn to identifying overbought and oversold levels are i.e. 70/30 levels respectively.
MT4 Indices Technical Indicator and Generating Indices Trading Signals
There are several methods used to trade, these are:
50-level Crossover Signals
- Buy signal - when the indicator crosses above 50 a buy/bullish signal is given.
- Sell Indices Trading Signal - when the indicator crosses below 50 a sell/bearish signal is given.
RSI Indices Trading Chart Patterns
Traders can draw indices trend lines and map out stock indexes chart patterns on the RSI indicator. The Relative Strength Index often forms stock indexes chart patterns such as head and shoulders stock indexes chart pattern which might not have formed clearly on the stock indexes price chart.
Trading Support/Resistance Breakouts
RSI is a leading indicator and can be used to predict Support/Resistance Breakouts before stock indexes price breaks its support/resistance level. RSI uses the swing failure signal to predict when stock indexes price is about to break support and resistance levels.
Swing Failure - Support and Resistance Breakout
- Overbought- levels above 80
- Oversold- levels below 20
These levels can be used to generate indices trading signals such as when RSI turns up from below 20 after oversold, buy and sell when RSI crosses to below 80 after overbought, sell. These signals are not suitable for trading Indices Trading because they are prone to a lot of whipsaws.
Divergence Indices Trading Setups
Divergence trading is one of the MT4 Indices Indicator method used to trade reversals of the stock indexes price trends. There are four types of divergences that can be traded with this indicator covered in the divergence tutorial on this website.