RSI Technical Analysis & RSI Trading Signals

Developed by J. Welles Wilder, explained in the book "New Concepts in Technical Trading Systems".

Relative Strength Index is the most popular indicator & it is a momentum oscillator and a trend following indicator. RSI compares a trading energies price magnitude of the recent energies price gains against its magnitude of recent losses energies price losses and draws this data on a scale of values which ranges between 0-100.

Relative Strength Index measures the momentum of a energies instrument; 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 plotted to identifying over bought and oversold levels are i.e. 70/30 levels respectively.

Technical Analysis & How to Generate Trade 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 Signal - when the indicator crosses below 50 a sell/bearish signal is given.

RSI Trading Chart Patterns

Traders can draw energies trend lines & map out energies patterns on the RSI indicator. The Relative Strength Index often forms energies chart patterns such as head and shoulders chart pattern which might not have formed clearly on the energies price chart.

Energy Trading Support/Resistance Breakouts

RSI is a leading indicator & can be used to predict Support/Resistance Breakouts before energies price breaks its support/resistance level. RSI uses the swing failure signal to predict when price is about to break support and resistance areas.

Swing Failure - Support and Resistance Breakout

Overbought/Oversold Conditions on Indicator

• Overbought- levels above 80
• Oversold- levels below 20

These levels can be used to generate energies trading signals such as when RSI turns up from below 20 after oversold, buy & sell when RSI crosses to below 80 after overbought, sell. These signals are not suitable for Energies Trading because they are prone to a lot of whipsaws.

Divergence Trade Setups

Divergence trading is one of the technical analysis method used to trade reversals of the energies price trends. There are four types of divergences that can be traded with this indicator covered in the divergence tutorial on this web site.