Hey traders, Relative strength index is a classic technical indicator. It is frequently applied to spot a market reversal. RSI divergence is considered to be a quite reliable signal of a coming trend violation and change.
Though newbie traders think that the application of the divergence is quite complicated, in practice, you can easily identify it with the following tips:
๐ First of all, let's start with the settings. For the input, we will take 7/close. For the levels, we will take 80/20.
Then about the preconditions: 1๏ธโฃ Firstly, the market must trade in a trend (bullish or bearish) with a sequence of lower lows / lower highs (bearish trend) or higher highs / higher lows (bullish trend).
2๏ธโฃ Secondly, RSI must reach the overbought/oversold condition (80/20 levels) with one of the higher highs/higher lows.
3๏ธโฃ Thirdly, with a consequent market higher high / lower low, RSI must show the lower high / higher low instead.
โก๏ธ Once all these conditions are met, you spotted RSI Divergence. A strong counter-trend movement will be expected.
Also, I should say something about a time frame selection. Personally, I prefer to apply it on a daily time frame, however, I know that scalpers apply divergence on intraday time frames as well.
โ๏ธRemember, that it is preferable to trade the divergence in a combination with some price action pattern or some other reversal signal.
โค๏ธPlease, support this idea with a like and comment!โค๏ธ
in what time frame and for what kind of trade ? intraday / short term/ long-term?
drnazisadat123
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Hi dear everyday you put new signal for forex
Schneeleopard
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Would you take the RSI(7) settings also for the 1H-Chart ? I am still a beginner and I donยดt know the right indicators for the 1H-Chart.........Thanks a lot !