How to Use the RSI Indicator to Win in Expert Option.

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Are you having it rough whenever using the Relative Strength Index (RSI) indicator on the Expert Option trading platform?

Do you have absolutely no idea how the indicator can be used to win trades while trading in Expert Option? 

Don’t worry.

In this post, expect to learn right from the basics to the advanced ways in which you can use the RSI indicator to win in Expert Option.

Let us kick it off by laying down the foundational basics about the indicator.

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What is the RSI Indicator?

RSI in trading stands for the Relative Strength Index (RSI).

The Relative Strength Index (RSI) is a versatile trading indicator that was designed by J. Welles Wilder.

It has been made available on the Expert Option trading platform, among other trading indicators and tools available on the platform.

The Relative Strength Index (RSI) works as an indicator of price momentum as well as to show price extreme points at which prices will most probably reverse.

On the Expert Option trading platform though, the Relative Strength Index (RSI) as an indicator of price momentum is limited by the unavailability of middle or zero line.

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That leaves Expert Option traders with only one option, which is using the Relative Strength Index (RSI) to point at price extreme points, hence highly likely price reversal points.

Once you have spotted a level where the price is likely to reverse, you can then patiently wait for the price to reverse.

After then, you can trade in the new direction of the market.

You can do so with the help of other chart analysis tools which when they opine the same as the RSI, then such will be a high probability entry you are staring at.

Components of the Relative Strength Index (RSI) Indicator.

The Relative Strength Index (RSI) on the Expert Option trading platform has two key levels. These are:

  • The red 70% level.
  • The green 30% level.

Besides the key levels, the Relative Strength Index (RSI) has a moving purple line that represents the price on the RSI oscillator.

It is the signal line that shows the current reading of the oscillator on the oscillator scale.

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Below find the default settings of the various components of the RSI available on the Expert Option Trading Platform. Each of the three components will be addressed. Here we go:

Component Level/Periods Width Color
Overbought 70% level 1px Red
Oversold 30% level 1px Green
Indicator Signal Line 14 periods 1px Purple

 

Orientation of the Relative Strength Index (RSI) on the Price Chart.

The Relative Strength Index (RSI) is usually found at the lower area of the Expert Option trading platform interface. It imprints as a bound indicator with an upper red 70% limit and a lower green 30% limit. Within the limits is also a signal purple line which depicts the indicator reading at any given time.

We mentioned that the only possible way to trade the Relative Strength Index (RSI) in Expert Option is by spotting price extremes. Price extremes can either be on the upper side or on the lower side. A price extreme on the upper side means that the price is way too high and will most probably reverse downwards shortly. On the other hand, a price extreme downwards means that the price is way too low and will most probably reverse upwards very soon.

An Upward Price Extreme.

Now, an upward price extreme will be shown by the Relative Strength Index (RSI) in the form of an overbought condition.

An overbought condition can be described as that state of the price of an asset where it has been bought so much that the buyers or the bulls have no more resources left to continue buying the asset.

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That is exactly the moment the sellers or the bears are always waiting for.

Now that it is here, the sellers are bound to waste no time but chip in almost immediately to begin selling the asset using their accumulated resources.

This is meant to drive the price of that asset down and a sell trade is bound to profit big time.

Usually, the Relative Strength Index (RSI) shows an overbought condition when the signal line reads above the red 70% overbought level.

Anytime the signal line is reading beyond the 70% extreme, then it is most likely that the price is about to reverse downwards very soon.

A Downward Price Extreme.

On the other hand, a downward price extreme will be shown by the Relative Strength Index (RSI) in the form of an oversold condition.

An oversold condition can be described as that state of the price of an asset where it has been sold so much that the sellers or the bears have no more resources left to continue selling the asset.

That is exactly the moment the buyers or the bulls are always waiting for.

Now that it is here, the buyers are bound to waste no time but chip in almost immediately to begin buying the asset using their accumulated resources.

This is meant to drive the price of that asset up and a buy trade is bound to profit markedly.

Usually, the Relative Strength Index (RSI) shows an oversold condition when the signal line reads below the green 30% oversold level.

Anytime the signal line is reading beyond the 30% extreme, then it is most likely that the price is about to reverse upwards very soon.

RSI Divergences.

Another way of determining price extremes using the RSI is the use of the RSI Divergences.

RSI divergences are inconsistencies between the Relative Strength Index (RSI) indicator and the price.

They occur when the RSI makes highs or lows which are not in sync with the highs or lows of the price.

For example, if the price makes higher highs, the RSI could be making lower highs.

This will be referred to as a Bearish RSI divergence, showing that the upward move is exhausted and the price is about to reverse downwards.

Still, if the price makes lower lows, the RSI could be making higher lows.

This will be referred to as a Bullish RSI divergence and shows that the downward move is exhausted and the price is about to reverse upwards.

Most new traders find it difficult to understand and subsequently trade RSI divergences.

However, if you take divergences in those simple terms, you will have less trouble trading them in Expert Option using the RSI.

How to Use the RSI Indicator to Win in Expert Option.

Don’t you understand a few things about the Relative Strength Index (RSI) indicator in the context of Expert Option now?

Of course, you do, and what you know now about the indicator is basically enough to get you going.

But, you will always want more, because there is always more to it than meets the eye.

I would like to discuss exactly how you can use the Relative Strength Index (RSI) indicator to win your trades in Expert Option.

I would like to move from the basis we have already established about the indicator and take you into the deeper waters as concerns the same.

Well, so much talk and no action?

Definitely not. Here are the various ways you can apply the Relative Strength Index (RSI) indicator in Expert Option to win more:

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  • RSI Divergence with Candlestick Patterns.
  • RSI with Support and Resistance.
  • The RSI – Trend Line Trading Strategy.
  • ‘RSI with Bollinger Bands’ Trading Strategy.
  • The RSI – Parabolic SAR Trading Strategy.
  • The RSI – Alligator Trading Strategy.
  1. RSI Divergence with Candlestick Patterns.

This strategy involves the use of candlestick patterns and the Relative Strength Index (RSI).

The Relative Strength Index (RSI) used here should be used in the default setting of 14 periods.

The Relative Strength Index (RSI) here is useful for its divergences, which are coupled with candlestick patterns to pick trade entries.

RSI divergences occur when the RSI makes highs or lows which do not match the highs or lows of the price. If the price makes higher highs, the RSI would be making lower highs (Bearish RSI divergence) and if the price makes lower lows, RSI would be making higher lows (Bullish RSI divergence).

Spotting the RSI Divergence.

The first step of this strategy is observing price action to be sure what the price is doing.

Is the price making higher highs, higher lows, lower highs, or lower lows?

Is the price in an uptrend or a downtrend?

The second step is observing the Relative Strength Index (RSI) to see what it is doing relative to the price.

For a successful bearish RSI divergence, the 14-period RSI must be making lower highs when the price is making higher highs.

However, for a successful bullish RSI divergence, the 14-period RSI must be making higher lows when the price is making lower lows.

Identifying Relevant Candlestick Patterns.

The next step involves identifying candlestick patterns as entry triggers.

Following a bullish RSI divergence on the falling price, spot a bullish reversal candlestick pattern.

It will be the buy trigger.

On the other hand, following a bearish RSI divergence on the rising price, spot a bearish reversal candlestick pattern. It will be the sell trigger.

Bullish reversal candlestick patterns include the morning star, bullish pin bar, three white soldiers, bullish engulfing, bullish inside bar, and many more.

Bearish reversal candlestick patterns, on the other hand, are such as the evening star, bearish pin bar, three black crows, bearish engulfing, bearish inside bar, and others.

Entering Positions.

The last step of this strategy involves entering buy or sell positions. Enter a buy position following a bullish RSI divergence and a bullish reversal candlestick pattern that occurs thereafter.

On the flip side, enter a sell position following a bearish RSI divergence and a bearish reversal candlestick pattern that occurs thereafter.

  1. RSI with Support and Resistance.

This strategy involves the use of the Relative Strength Index (RSI) in conjunction with support and resistance zones.

The default setting of the Relative Strength Index (RSI) at 14 periods works best.

The Relative Strength Index (RSI) here, is useful in the identification of possible oversold and overbought conditions.

Such conditions are then coupled with support and resistance zones to pick trade entries.

Oversold conditions are when the RSI reads below 30% while overbought conditions are when the RSI reads above 70%.

Establishing Support or Resistance Zones.

The first step of this strategy is establishing support or resistance zones.

A support zone is a price level where falling prices seem not to cross downwards.

Once the falling price hits that level, it rejects the level or reverses upwards.

A resistance zone, on the other hand, is a price level where rising prices seem not to cross upwards.

Once the rising price hits that level, it rejects the level or reverses downwards.

If that repeats itself, the next time the price is at that level is most likely to behave just as it has behaved in the past.

You can use horizontal lines on the Expert Option trading platform to highlight those price levels.

That way, you won’t miss it when the price comes to the highlighted level.

RSI Signals.

The second step involves observing the Relative Strength Index (RSI) to generate trading signals.

For a valid bullish signal, you must first have established a support level in the first step and the price approaching the same level, then the RSI must fall below 30%.

For a valid bearish signal, however, you must first have established a resistance level in the first step and the price approaching the same level, then the RSI must rise above 70%.

Entry Triggers.

The third step involves looking for entry triggers of the identified bullish or bearish signals.

For the bullish signal (Price at Support + RSI below 30), look for bullish reversal candlestick patterns at the support.

For the bearish signal (Price at Resistance + RSI above 70), however, look for bearish reversal candlestick patterns at the resistance.

Bullish reversal candlestick patterns include the morning star, bullish pin bar, three white soldiers, bullish engulfing, bullish inside bar, and many more.

Bearish reversal candlestick patterns, on the other hand, are such as the evening star, bearish pin bar, three black crows, bearish engulfing, bearish inside bar, and others.

Entering Positions.

The fourth step involves entering buy or sell positions. Enter a buy position following a bullish signal and a buy trigger and a sell position following a bearish signal and a sell trigger.

  1. The RSI – Trend Line Trading Strategy.

This strategy couples the Relative Strength Index (RSI) with trend lines to create a trading harmony meant to pick high probability entries while trading.

Given that both tools are available on the Expert Option trading platform, traders can utilize them in this strategy which we are going to discuss shortly.

Trend Lines.

Trend lines are simply lines on the price chart which are drawn to join specific points along the price of an asset, showing the general trend of the market.

The only available tool for drawing trend lines on the Expert Option trading platform is the Ray drawing tool.

It is easy to apply on the chart and adjust to connect the desired pivot points of the price.

Application of RSI on the Chart.

The first step of this strategy is applying the Relative Strength Index (RSI) on your chart.

Apply it in its default setting of 14 periods. It can work on any timeframe and so choose your most preferred timeframe.

Spotting Pivot Points.

The next step involves picking pivot points on the price to anchor the trend lines.

For a trend line to be one, it has to pass through a minimum of three pivot points.

Therefore, identify at least three, or even more points on the price chart, through which the trend line will pass.

The pivot points you identify must be all lows or all highs.

You cannot join highs and lows together in any meaningful trend line trading unless you are creating a zigzag indicator, which is not the case here.

Drawing Trend Lines.

The next step involves the actual drawing of trend lines.

Click on the button labeled “Drawings”, choose the Ray drawing tool and apply it to the price chart.

You can then adjust it to fit on at least three pivot points of the price which you had previously identified.

Remember they may either be at least three highs or at least three lows that are prominent.

You can always repeat the previous steps and this step to draw as many trend lines on the price chart as you wish, depending on how many your analysis requires.

Single Trend Line Analysis.

Trend lines can be drawn to join purely lows or purely highs of the price.

That means for this case, only one trend line will be used and not a channel of two or more trend lines.

 

If the trend line joins lows of the price and slopes upwards, then the general trend of the market is upwards.

You can enter a buy position if the price respects the line with a retest, failing to break it downwards.

The RSI must be reading below 30% showing an oversold condition.

On the other hand, enter a sell position if the price breaks the line downwards and retests to confirm the downward breakout.

For this, the RSI must be reading above 70% showing an overbought condition.

If the trend line joins highs of the price and slopes downwards, then the general trend of the market is downwards.

You can enter a sell position if the price respects the line with a retest, failing to break it upwards.

The RSI must be reading above 70% showing an overbought condition.

On the other hand, enter a buy position if the price breaks the line upwards and retests to confirm the upward breakout.

For the latter, the RSI must be reading below 30% showing an oversold condition.

Channel Analysis.

Trend lines may also form a channel, where pivot points were identified for both highs and lows.

If you draw one trend line joining at least three highs and another at least three lows and they form a perfect channel, then you can use them as support or resistance levels.

That is regardless of whether the channels slope upwards, downwards, or are horizontal.

A perfect channel is to means that the lines are almost parallel to each other after one joins the highs and the other the lows.

Buy when the price falls to and retests the lower trend line without breaking it downwards.

The RSI must be reading below 30% showing an oversold condition. However, sell when the price rises to and retests the upper trend line without breaking it upwards.

The RSI here must be reading above 70% showing an overbought condition.

Alternatively, buy when the price breaks above the upper trend line and retests in that direction confirming the upward breakout.

The RSI must be reading below 30% showing an oversold condition. In contrast, sell when the price breaks below the lower trend line and retests in that direction, confirming the downward breakout.

The RSI here must be reading above 70% showing an overbought condition.

Advanced Trend Line Analysis.

There are other sophisticated analyses for experienced traders such as drawing chart patterns and analyzing them using trend lines.

If you are conversant with this dimension of trading, then you know what I am talking about.

Apply trend lines accordingly in respect to your chart analysis, respecting the oversold and overbought conditions as shown by the RSI.

  1. ‘RSI with Bollinger Bands’ Trading Strategy.

The Relative Strength Index (RSI) is best applied with the Bollinger Bands indicator by making use of the Outlier bar and the Gimmee bar concepts of Bollinger band trading.

Let us find out how that is possible as we proceed.

Outlier Bar Concept.

Under normal circumstances, the price should remain contained within the confines of the Bollinger bands envelope.

If it has to move outside the envelope of the Bollinger bands tool, then at least not an entire price bar, but just part of a price bar which must have the other part contained within the Bollinger band’s bandwidth.

So, knowing what you know, what do you make of a scenario where a whole bar is entirely outside the confines of the Bollinger band’s bandwidth?

Such a bar is what we call an outlier bar.

That is to mean that an outlier bar is a candlestick whose whole dimension lies outside the Bollinger bands tool, either above the upper band line or below the lower band line.

Then what significance is attached to outlier bars? Basically, prices cannot stay beyond the Bollinger bands for long.

That is to mean that if an outlier bar forms above the upper band line, then it is expected that the price will soon fall back to the bandwidth of the Bollinger bands indicator.

On the other hand, if an outlier bar forms below the lower band line, it is expected that the price will soon rise back into the bandwidth of the Bollinger bands indicator.

Gimmee Bar Concept.

The most appropriate market for Gimmee bar trading is one that is in low volatility and range.

Observe the price to see which markets seem to reverse almost every time the price hits either the upper or the lower Bollinger Band.

You can consider looking for less volatile markets on currency pairs whose trading sessions have closed.

Once you have a low volatility market, you must establish a trading range.

Do so by observing price action in relation to the Bollinger Bands indicator.

A trading range occurs where the price touches the upper or lower Bollinger Band but reverses towards the central Moving Average, instead of breaking out of the bandwidth of the indicator.

The price must therefore tag the upper and lower Bollinger bands several times without breaking out to resort to a trading range.

Once the previous conditions are met, then identifying the Gimmee bar is not difficult.

A bullish Gimmee bar occurs when the price, after falling to touch the lower Bollinger Band, forms a bullish candlestick.

A bearish Gimmee bar, on the other hand, occurs when the price, after rising to touch the upper Bollinger Band, forms a bearish candlestick.

Note that you must avoid Gimmee bars that overlap with or are close to the Bollinger Band central Moving Average, have a wide range, or are followed by a trading gap.

Trading Outlier and Gimmee Bars with the RSI.

Once you have your Outlier bar or Gimmee bar, then the next thing to do is to observe the action of the Relative Strength Index (RSI).

An outlier bar that forms above the upper band of the Bollinger band indicator warrants a sell position.

This must coincide with the RSI reading above 70% showing an overbought condition in order to enter a sell position.

On the other hand, an outlier bar that forms below the lower band of the Bollinger band indicator calls for a buy position.

For this case, the RSI must be reading below 30% showing an oversold condition before entry.

A bearish Gimmee bar that forms after the price touches the upper band of the Bollinger band indicator is a sell signal.

Enter a sell position only when the RSI reads above 70% showing an overbought condition.

On the flip side, a bullish Gimmee bar that forms after the price touches the lower band of the Bollinger band indicator is a buy signal.

Here, only enter a buy position if the RSI reads below 30% showing an oversold condition.

  1. The RSI – Parabolic SAR Trading Strategy.

This strategy makes use of the Parabolic SAR in combination with the RSI indicator to make better and more informed trading decisions.

You understand that a trading setup supported by more than one indicator stands a better chance of being correct in predicting the price direction.

The Parabolic SAR.

Parabolic SAR means parabolic Stop and Reverse.

It is a technical analysis tool that hints at the direction the price of an asset is moving.

It does so by showing potential reversal points of the price, where the current trend ceases and a new one begins to form.

The Parabolic SAR is represented by dots that correspond to each candlestick or price unit that forms.

It is those dots that it uses to show potential price reversal points, but how?

Usually, whenever the Parabolic SAR dots are above the price of an asset, such price is on a downtrend.

Conversely, whenever the Parabolic SAR dots are below the price, such price is on an uptrend.

The above is to mean that where the dots of the parabolic SAR were above the price of an asset but a new dot forms below the price, an uptrend has just begun.

On the contrary, where the dots were below the price but a new dot forms above the price, a downtrend has just begun.

So now, how do you use the Parabolic SAR indicator together with the RSI indicator in a perfect symphony to win more in Expert Option?

It is quite simple, especially now that you understand the ins and outs of the RSI indicator as you do.

Parabolic SAR Bullish and Bearish Signals.

For the bullish signal, the Parabolic SAR dots will begin shifting from above to below the price.

Better still, the Parabolic SAR dots have been below the price for quite some time and are away from the price, and not drifting any close.

That is indicative of a strong uptrend which is not weakening any time soon.

The bearish signal is the opposite.

The Parabolic SAR dots will begin shifting from below to above the price.

Better still, the Parabolic SAR dots have been above the price for quite some time and are away from the price, and not drifting any close.

That is indicative of a strong downtrend which is not weakening any time soon.

Once you have such a perfect bullish or bearish signal, then what you do next is to apply the next tool, which is the RSI indicator.

The indicator is easy to use as we have established before, and as we shall confirm here.

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Trading the Parabolic SAR with the RSI Indicator.

You will use the RSI indicator to confirm bullish and bearish signals obtained from the Parabolic SAR indicator.

After a perfect Parabolic SAR bullish signal has formed, check to confirm that the Relative Strength Index (RSI) indicator is showing an oversold condition.

That will be by the RSI reading being below the green 30% level.

An oversold condition implies that the asset has been sold so much that the bears have exhausted their resources.

This gives the bulls an opportunity to exploit by driving the price up.

On the contrary, after a perfect Parabolic SAR bearish signal has formed, check to confirm that the Relative Strength Index (RSI) indicator is showing an overbought condition.

That will be by the RSI reading being above the red 70% level.

An overbought condition means that the asset has been bought too much until the bulls have depleted their resources.

This leaves only the bears to exploit the opportunity by driving the price down.

  1. The RSI – Alligator Trading Strategy.

This manner of trading brings into play both the Expert Option Relative Strength Index (RSI) and the Alligator indicator for profitable trading.

Combining both an indicator and an oscillator must be one of the best ways to increase precision in the prediction of the market.

The Alligator.

The Alligator indicator is a trend technical analysis tool that uses three smoothed moving averages.

It will show you the direction of the general trend so that you can trade in that direction, increasing your chances of winning trades placed in the direction of the trend.

It also shows you possible trend reversals so that you can stop trading in the direction of the underlying trend and also catch a new trend as early as possible.

In any setting and uniquely for Expert Option, the three moving averages of the Alligator will arrange themselves such that the jaw (red line) is closest to the price.

It is then followed by the lip (yellow line) and then the teeth (green line), is the farthest from the price.

Alligator Bullish and Bearish Signals.

Wondering how you can use the Alligator indicator in Expert Option to spot a bullish signal? Below are the specifications of Alligator bullish signals:

  • The three moving averages are arranged in descending order of jaw, lip, and teeth. All this happens with the price being above all three lines. The jaw is closest to, and the teeth are farthest from the price.

  • The ascending order of jaw, lip, and teeth with the price below all the lines begins to change. It begins to change to the descending order of jaw, lip, and teeth with the price above all the lines.

What about the bearish signals? How can you use the Alligator in Expert Option to know if it is really a bearish signal you have there? Below are the specifications of Alligator bearish signals:

RSI Indicator to Win in Expert Option

  • The three moving averages are arranged in ascending order of jaw, lip, and teeth. All this happens with the price being below all three lines. The jaw is closest to, and the teeth are farthest from the price.

RSI Indicator to Win in Expert Option

  • The descending order of jaw, lip, and teeth, with the price above all the lines, begins to change.  It begins to change to the ascending order of jaw, lip, and teeth with the price below all the lines.

Trading the RSI with the Alligator Indicator.

You will use the Relative Strength Index (RSI) indicator to confirm bullish and bearish signals obtained from the Alligator indicator.

After a perfect Alligator indicator bullish signal has formed, check to confirm that the Relative Strength Index (RSI) indicator is showing an oversold condition.

That will be by the RSI reading being below the green 30% level.

An oversold condition implies that the asset has been sold so much that the bears have exhausted their resources.

This gives the bulls an opportunity to exploit by driving the price up.

On the contrary, after a perfect Alligator indicator bearish signal has formed, check to confirm that the Relative Strength Index (RSI) indicator is showing an overbought condition.

That will be by the RSI reading being above the red 70% level.

An overbought condition means that the asset has been bought too much until the bulls have depleted their resources.

This leaves only the bears to exploit the opportunity by driving the price down.

Wrapping Up on How to Use the RSI Indicator to Win in Expert Option.

Hey!

How many strategies were those again?

A whole six of them, all formulated around the Relative Strength Index (RSI) indicator. If you are an RSI enthusiast, then this post must have done you a great deal.

You might as well have fallen in love with the RSI after having read this, and so to all of you alike, I am sure that the post has been helpful.

Go ahead and enjoy the wins on the Expert Option trading platform.

Happy Trading!

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