How to the trade RSI with price action confirmation signal ?

[vickymacklean]

The Forex market is a very big market and every single day many new traders are joining this online market. In comparison with other professional trading has the high-profit potential in terms of profit. But making money is not so easy. Many traders have considered it as an easy task and at the end of the day, all of them have lost a huge amount of money. Most of them considered trading money making the machine. In fact, it’s a money making machine but you must know how to trade it. You have to devote yourself to the proper learning process. There are many things that you have read and learn by heart. If you skip any of the lesion in the Forex market, then you won’t survive in this market. Though we have many ways of trading the market still we might develop one unique trading system to place our trade. In our today's article, we will learn how to deal with the RSI indicator and trade with price action confirmation signal.

What is RSI indicator?

RSI indicator is a leading indicator which means it will give early trading signals to the traders. Most of the professional traders at Saxo use it to find the overbought and oversold condition of the currency pair. If the value of the RSI indicators stays above the 80 mark, then we can assume that the price of the certain asset is most likely to fall since it’s in an overbought condition. On the contrary, if the value of the RSI indicator stays below the 20 mark then we will look for buying opportunity since the market is in oversold condition.

Support and resistance level

Use of indicator is very much popular among the novice trader. In fact, most of them often overload their trading charts with tons of indicators. But in our system, we will be using only the RSI to trade the key support and resistance level in the CFD trading industry. So you can easily understand that in order to trade the market with RSI indicator we must have the proper knowledge to identify key support and resistance level.

Support and resistance level are the major reversal zone in the Forex market. Most new traders use the lower time frame to find their key trading levels. But if you really want to execute high-quality trades in the online trading world then you need to use the higher time frame. In lower time frame the traders face too many false trading signals and it’s really hard for the new guys to identify the quality trading signals. But when you use the higher time frame you filtering out the noise to find best possible trade setup.

Price action signal and RSI reading

The expert currency traders always wait for the price to hit a major reversal level. For instance, if the price of certain asset hit the major support level in the global market then look at their RSI reading. If the value of the RSI reading is less than 20 then they look for bullish price action confirmation signal. On the contrary, for the bearish price action confirmation signal, the value of the RSI reading must be above the 80 market.

Trading the price action confirmation signal using the RSI indicator is very profitable. As a professional currency trader, you must use the higher time frame to do your technical analysis so that no trades are being stopped out by the false spike. Being new to this industry you might often trade the market without any price action confirmation signal but in that case, you have a high chance to lose the trade. Since the RSI indicator is leading indicator you must use other trading parameters like candlestick pattern to find the best possible trading signal.