What is Relative Strength Index (RSI)?
Relative Strength Index (RSI) is a core concept in currency trading.
A momentum oscillator created by J. Welles Wilder that measures the speed and change of price movements on a scale from 0 to 100.
Understanding Relative Strength Index (RSI) helps you manage your risk and spot high-probability trade setups.
Why It Matters for Forex Traders
In forex trading, Relative Strength Index (RSI) helps you protect your capital. It gives you a clear rule to follow instead of guessing.
How to Identify and Apply Relative Strength Index (RSI)
- 1Spot and mark Relative Strength Index (RSI) on your chart during active trading hours.
- 2Check that the overall market trend agrees with your trade idea.
- 3Always place a protective stop loss before entering any position.
Practical Forex Example
For example, on a EUR/USD trade, applying Relative Strength Index (RSI) allows you to set clear entry and exit points before risking real money.
PRO TRADER TIP
Always test strategies involving Relative Strength Index (RSI) on a free demo account first before trading with real capital.