#4. RSI Failure Swings
RSI Failure Swings is a strategy recommended by many experts in the field of foreign exchange.
This is also a quite unique trading strategy with RSI by observing the price action of the RSI line at two areas that limit OVERBUYING and OVERSELLING.
The steps to implement this strategy are as follows:
We will wait for the RSI indicator to enter the limit zone (overbought or oversold).
Then wait for RSI to break out of the limit zone
Observe the movements of RSI
Wait for RSI to break through its previous HIGHEST (or LOWEST) price range.
Maybe you are feeling confused with the above description, don't worry, I will give a specific example of this strategy right below.
For BUY orders
Notice the arrows marked on the RSI chart area, I will explain what they mean:
First arrow: shows that RSI has entered the oversold zone
Second arrow: shows that RSI has broken out of the oversold zone
Third arrow: shows that RSI returned and refused to re-enter the oversold area
Fourth arrow: shows that RSI has broken out of the nearest RSI peak on the left.
All of the above gives us a signal that the market will go up and execute a BUY order.
For SELL orders
First arrow: shows that RSI has entered the overbought zone
Second arrow: shows that RSI has broken down from the overbought zone
Third arrow: shows the RSI area returning and oscillating below the overbought area
Fourth arrow: shows that RSI has broken out of the nearest RSI bottom on the left.
Those are the signs that give us a SELL command.
Consider the pattern of the RSI indicator similar to the pattern of price with support and resistance zones, which is the main key in this RSI Failure Swings trading idea.
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