• This article, written by Alan Collins is taken from the FX Trader Magazine (JAN/MARCH 2013 issue).

The Relative Strength Indicator, created by Welles Wilder, has long been used by many market participants in their analysis. For the most part this application has been applied via daily charts, or longer periods, primarily as a means to identify trend. But there are a number of methods that RSI can be used for; 

  • As a measure of an overbought/oversold situation. 
  • An indicator of the underlying trend & of trend breaks. 
  • A buy/sell signal when the 50% line is crossed. 
  • An indicator of possible Divergence 

For the investor or proprietary trader these methods are without doubt tools that, taken in context with other technical indicators, will prove useful. But do they work, and can they be successfully employed, in shorter intraday time frames? In this article I will use the same hourly GBPUSD chart, and the same 8 period RSI, and apply the four methods above to illustrate how to use them and assess whether they’re likely to be beneficial. Lastly I’ll add a lesser known but powerful number of other situations were only warnings of what turns out to be minor profit taking rallies inside the more pronounced trend.

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Editors’ Picks

EUR/USD sees cushion around 1.0580 on subdued DXY, Fed Powell in focus

EUR/USD sees cushion around 1.0580 on subdued DXY, Fed Powell in focus

EUR/USD is holding above 1.0570 ahead of ECB Lagarde’s speech. A significant rate hike by the ECB looks likely as the inflation rate has climbed above 8%. The speech from Fed Powell will fade some clouds of uncertainty over the extent of July’s rate hike.

EUR/USD News

GBP/USD approaches 1.2300 as Brexit woes battle softer USD ahead of US Consumer Confidence

GBP/USD approaches 1.2300 as Brexit woes battle softer USD ahead of US Consumer Confidence

GBP/USD grinds higher around the intraday top near 1.2285, following a sluggish start to the week, as buyers cheer the US dollar weakness during Tuesday’s Asian session. The Cable pair ignores recent negative news surrounding Brexit, as well as the UK’s political jitters.

GBP/USD News

USD/JPY drops towards 135.00 amid risk-aversion

USD/JPY drops towards 135.00 amid risk-aversion

USD/JPY is heading south to test 135.00, having failed to sustain above 135.50. The pair is falling in tandem with the US Treasury yields while the return of risk-off flows underpins the USD bounce. Focus shifts to US data. 

USD/JPY News

Editors’ Picks

EUR/USD sees cushion around 1.0580 on subdued DXY, Fed Powell in focus

EUR/USD sees cushion around 1.0580 on subdued DXY, Fed Powell in focus

EUR/USD is holding above 1.0570 ahead of ECB Lagarde’s speech. A significant rate hike by the ECB looks likely as the inflation rate has climbed above 8%. The speech from Fed Powell will fade some clouds of uncertainty over the extent of July’s rate hike.

EUR/USD News

GBP/USD approaches 1.2300 as Brexit woes battle softer USD ahead of US Consumer Confidence

GBP/USD approaches 1.2300 as Brexit woes battle softer USD ahead of US Consumer Confidence

GBP/USD grinds higher around the intraday top near 1.2285, following a sluggish start to the week, as buyers cheer the US dollar weakness during Tuesday’s Asian session. The Cable pair ignores recent negative news surrounding Brexit, as well as the UK’s political jitters.

GBP/USD News

Gold: Can bulls defend the critical $1,820 support? Premium

Gold: Can bulls defend the critical $1,820 support?

XAUUSD opened a new week on a positive note but failed to sustain the previous upbeat momentum after running into strong barriers near the $1,842 region. The metal shaved off the early gains and fell nearly $20 from the highest point of the day to settle Monday in the red at $1,823.

Gold News

LUNA 2.0 price is primed for 60% rally

LUNA 2.0 price is primed for 60% rally

LUNA price breached the range it was trading in and crashed violently in June. However, buyers seem to be making a comeback, suggesting that a recovery rally is in effect. The ongoing retracement hints at a 60% upswing to $3.50.

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