Relative Strength Index Gold Analysis and RSI Trading Signals
Created by J. Welles Wilder, explained in the book "New Concepts in Technical Trading Systems".
RSI is the most popular indicator and it is a momentum oscillator and a gold trend following indicator. RSI compares a xauusd price magnitude of the recent xauusd price gains against its magnitude of recent losses xauusd price losses & plots this data on a scale of values that ranges between 0-100.
RSI measures the momentum of gold; 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 spotting overbought and oversold levels are i.e. 70/30 levels respectively.
Gold Trading Analysis & How to Generate 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 trading signal is given.
- Sell Gold Trading Signal - when the indicator crosses below 50 a sell/bearish trading signal is given.
RSI Gold Chart Patterns
Traders can draw gold trend lines and map out xauusd chart patterns on the RSI indicator. The RSI often forms xauusd chart patterns such as head & shoulders chart pattern which might not have formed clearly on the xauusd price chart.
Gold Support/Resistance Breakouts
RSI is a leading indicator and can be used to predict Support/Resistance Breakouts before xauusd 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 & Resistance Break out
Overbought/Oversold Conditions on Indicator
- Overbought- levels above 80
- Oversold- levels below 20
These levels can be used to generate gold 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 Gold because they are prone to a lot of whipsaws.
Divergence XAUUSD Trading Setups
Divergence trading is one of the technical analysis method used to trade reversals of the xauusd price trends. There are four types of divergences that can be traded with this indicator covered in the divergence tutorial on this web site.
