What Is The Relative Strength Index?

Relative strength indicator binary options

No Comments The Relative Strength Index RSI is probably one of the most important indicators for binary options traders, and all of them, have probably, tried to incorporate this indicator into their trading decisions.

relative strength indicator binary options

This indicator, the RSI, is usually a part of all t rading platformswhich can be found either under the oscillator relative strength indicator binary options momentum indicators, whereby traders should use the default 14 period. The indicator will take binary options high jump account the candle chart, more precisely 14 last candles to determine the closing levels based on this information.

relative strength indicator binary options

The RSI indicator uses the standard levels which are available with all brokers and which are called the 70 and 30 levels. The 70 level simply indicates when the market is overbought, while 30 level represents the opposite, showing when the market is oversold.

According to this theory, the best would be if traders would simply buy put options if the indicator is pointing towards the 70 level, and place call options if it is more in the 30 level area. Is it really that simple?

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This is a sure and proved recipe only when a consolidation pattern has been identified. To make a successful trade with this indicator, traders should focus on bigger time frames in order to get a range triangle on the chart, and only after that, it is recommended to trade it on smaller timeframes with the RSI indicator.

Top 5 key technical indicators for trading binary options

The video also shows how to integrate the indicator to other currency pair charts as well. It will always show overbought and oversold levels, but, traders need to bear in mind, that it only works when there is arrange or when the market consolidates.

relative strength indicator binary options

Sometimes traders do not know how to find a range, but they can do relative strength indicator binary options by trading patterns which have a fair chance to pick up on ranging conditions. Another way to find them is observing trading sessions you would like to trade. For example, when you find yourself, after the extension, in a third move that is extending, take a look at the previous wave, which will give you a hint of how the fourth wave will move.

If the second wave exhibits a plain correction, you can expect the fourth wave to be complex and that it will need more time, whereby you can create a range.

How To Interpret The RSI

A bullish impulsive movement indicates that a call option should be bought as the RSI reaches the 30 level area, whereby the expiry date should adjust to the timeframe which was set for the RSI. Use the lack of liquidity in the Asian session market to your benefit and create a range which will indicate the perfect time to strike for the perfect price.

Identification of oversold and overbought markets is far easier with a creation of ranges and the RSI, the indicator who instantly picks up on the overbought and oversold level which gives traders the opportunity to strike when the price is right.

Traders should bear in mind that the oscillator is detached and not to be found on the main chart, but it opens in a separate window below the chart whereby traders can customize the settings or periods how they want.

relative strength indicator binary options

Nevertheless, it is recommended to stay with the default 14 periods which guarantees that the indicator will examine 14 different candles. If traders set a bigger number of candles to be examined, the oscillator will take into account more candles which means that the RSI indicator will be flatter which can make it difficult to reach oversold and overbought levels.

Settings and Configurations

Divergence and RSI When trading binary options, it can be quite interesting to observe the divergence between the price and indicator, when using the RSI indicator, but this phenomenon is not that common and appears only in special circumstances. Nevertheless, the Binary Options Academy is going to examine that factor as well in order to give you a more comprehensive outlook of trading with RSI.

Newcomers especially can profit from the RSIs clear predictions. If you want to create a binary options strategy that keeps things simple by relying on a simple indicator, the RSI is your best choice. If you want to combine multiple indicators, it is always a good idea to add the RSI to the mix.

The RSI displays different values for different timeframes and expiry periods, and it is common knowledge that an asset can be overbought in one, and not in the other timeframe.

This means that the expiry date for any asset traded is different on the daily chart than an asset which is being observed on an hourly chart, and the RSI has a dual here by examining both situations.

relative strength indicator binary options

The RSI is a strong trading tool when a trader knows how to incorporate it in its trading, but also its limits. Start trading now by opening a FREE account on one of our recommended brokers. Recommended Binary Option Brokers:.