- This article, written by Alan Collins is taken from the FX Trader Magazine (JAN/MARCH 2013 issue).
The Relative Strength Indicator, created by Welles Wilder, has long been used by many market participants in their analysis. For the most part this application has been applied via daily charts, or longer periods, primarily as a means to identify trend. But there are a number of methods that RSI can be used for;
- As a measure of an overbought/oversold situation.
- An indicator of the underlying trend & of trend breaks.
- A buy/sell signal when the 50% line is crossed.
- An indicator of possible Divergence
For the investor or proprietary trader these methods are without doubt tools that, taken in context with other technical indicators, will prove useful. But do they work, and can they be successfully employed, in shorter intraday time frames? In this article I will use the same hourly GBPUSD chart, and the same 8 period RSI, and apply the four methods above to illustrate how to use them and assess whether they’re likely to be beneficial. Lastly I’ll add a lesser known but powerful number of other situations were only warnings of what turns out to be minor profit taking rallies inside the more pronounced trend.
Editors’ Picks
EUR/USD stays below 1.0550 ahead of US data
EUR/USD trades in the red below 1.0550 as investors await macroeconomic data releases from the US. The pair faces headwinds from risk-off flows due to rising geopolitical conflict between Russia and Ukraine and worries over the potential US tariffs on the EU.
GBP/USD pressured toward 1.2600, eyes on US data and Fedspeak
GBP/USD stays on the back foot and trades below 1.2650 on Thursday. The pair's underperformance could be attributed to a risk-aversion market environment. Traders stay cautious amid rife geopolitical tensions ahead of mid-tier US data and Fedspeak.
USD/JPY declines to near 154.00 even though US Dollar ticks up
USD/JPY falls to near 154.00 despite the US Dollar remaining firm. Donald Trump’s policies are expected to boost US inflation and economic growth. BoJ Ueda didn’t commit to an interest rate hike move for December.
Editors’ Picks
EUR/USD stays below 1.0550 ahead of US data
EUR/USD trades in the red below 1.0550 as investors await macroeconomic data releases from the US. The pair faces headwinds from risk-off flows due to rising geopolitical conflict between Russia and Ukraine and worries over the potential US tariffs on the EU.
GBP/USD pressured toward 1.2600, eyes on US data and Fedspeak
GBP/USD stays on the back foot and trades below 1.2650 on Thursday. The pair's underperformance could be attributed to a risk-aversion market environment. Traders stay cautious amid rife geopolitical tensions ahead of mid-tier US data and Fedspeak.
Gold extends gains beyond $2,660 amid rising geopolitical risks
Gold extends its bullish momentum further above $2,660 on Thursday. XAU/USD rises for the fourth straight day, sponsored by geopolitical risks stemming from the worsening Russia-Ukraine war. US data and Fedspeak are next in focus.
BTC hits an all-time high above $97,850, inches away from the $100K mark
Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
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