Learn RSI forex trading strategy to become consistent and profitable in your forex trading career. Using RSI or relative strength index indicator is somewhat confusing for beginner trader. Actually there is no indicator that is very very accurate when traing forex or even stocks.
I mean, we cannot predict what will happen to the market after we hit the buy and sell button. Sometimes, when we buy the market will go down and when we sell, the market will go up.
But using RSI indicator the proper way when trading forex is a different story. You may add RSI in your MT4 or MT5 trading platform or even in your TradingView account. But, do you know how to use it correctly?
Many YouTube videos you can learn with using RSI in forex, however, are they all saying the truth? Are they all became profitable on what they are talking about especially when using relative strength index indicator? I think no.
Learn RSI Forex Trading Strategy – Relative Strength Index Indicator
So here we want to share some of the strategies learned and used when trading forex using RSI indicator. This might not be the best RSI forex strategy, but I will assure you, you can improve your trading.
Inserting RSI Forex Indicator in MT4/MT5
Just press ctrl+n, then find indcator area, then attached RSI or relative strength index indicator. After that, set the parameters to default or whatever you want.
Oversold and Overbought Zone
The RSI has overbought and oversold region. Do you know that even the RSI sometimes in oversold area, it doesn’t mean it will go up and reverse.
Sometimes, it will continue going down and forex traders will lose money when they using oversold and overbought area.
Solution:
You cannot find many good signal on RSI forex indicator, but try in the higher time frame and be consistent.
Just be consistent in this strategy. When oversold, “BUY, and “SELL” when overbought. Here’s the hint. If you want to be profitable in forex trading, there you need to be systematic. Just use risk reward ratio over and over again.
Example in Using RSI Forex Indicator
Use risk reward ratio of 1:3 over and over again. Since RSI forex indicator has many false signal. You can still become profitable since you are using good RRR.
When you enter a trade you have a risk of 50 pips and reward of 150 reward in this example.
Say for instance, you enter a trade in false signals 3 times out of 5 and you only get 2 wins.
- 3 losses X 50 pips = 150 loss
- 2 wins x 150 pips = 300 pips
- Net Profit: 150 Pips
What if there are many false signals, 7 out 10 false signal you think the price will reverse when they are in oversold and overbought area, and you will get only 3 winners.
- 7 losses x 50 pips = 350 pips
- 3 wins x 150 pips = 450 pips
- Net Profit= 100 pips
RSI Forex Fine Tuning
What if We Fine Tune the RSI Forex Indicator, we still use the default settings but we will add 200 exponential moving average.
In this RSI forex strategy, it will help you gain a lot of pips. Here’s how;
- Buy Mindset – when the price is above the 200 EMA
- Trigger: When the RSI indicator is in Oversold Area (crossover 30)
- Sell Mindset – when the price is below the 200 EMA
- Trigger: When the RSI indicator is in Overbought Area (crossover 70)
And of course, you will need to be consistent and use the same risk reward ratio over and over again. After you enter a trade, let it be lose or win. And do it over and over again and you will soon get amazing results!
What can you say about using RSI indicator when trading forex? Anything you want to add? Just do it in the comment box below. Thanks!