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RSI CFDs Strategies

Relative Strength Index Indicator CFD Strategy

Relative Strength Index or RSI is one of the most popular cfd indicator used in cfd trading. It is an oscillator cfd indicator which oscillates between 0 -100. This a cfd trend following cfd indicator. It indicates the strength of the cfd trend, values above 50 indicate a bullish cfd trend while values below 50 indicate bearish CFD trend.

RSI CFD Technical Indicator Measures Momentum of a CFD Trend.

The center-line for the RSI is 50 cfd indicator, crossover of the center-line indicate shifts from bullish to bearish cfd trend and vice versa.

Above 50, the buyers have greater momentum than the sellers and cfds price on the cfds chart will keep going up as long as this RSI indicator stays above 50.

Below 50, the sellers have greater momentum than the buyers and cfds price on the cfds chart will keep going downwards as long as RSI indicator stays below 50.

How to Trade CFDs Trading with RSI CFDs Trading Indicator - RSI CFD Strategy: 50 Center-line Crossover CFD Method

RSI CFDs Trading Indicator - How to Trade CFD Trading with RSI Technical Indicator

In the cfd example above, when the cfd indicator is below 50, the cfds price kept moving in a downward cfds trend. The cfds price continues to move down as long as RSI indicator was below 50. When the RSI indicator moved above 50 it showed that the momentum had changed from sell to buy and that the downward cfd trend had ended.

When the RSI indicator moved to above 50 the cfds price started to move upwards and the cfd trend changed from bearish to bullish. The chart cfds price continued to move upwards and the RSI indicator remained above 50 afterwards.

From the cfd example above, when the cfd trend was bullish sometimes the RSI would turn downwards but it would not go below 50, this shows that these temporary moves are just retracements because during all these time the cfds price cfd trend was generally upwards. As long as RSI indicator does not move to below 50 the current cfd trend remains intact. This is the reason the 50 center line mark is used to demarcate the signal between bullish and bearish cfds trade signals.

The RSI technical indicator uses 14 day period as default period, this is the period recommended by J Welles Wilders when he introduced it. Other commonly used periods used by CFD traders are the 9 and 25 day moving average.

RSI technical indicator period used depends on the cfds chart time frame you're using to trade, if you are using day cfd chart time frame the 14 period will represent 14 days, while if you use 1 hour cfd chart timeframe the 14 period will represent 14 hours. For our cfd example we shall use 14 day moving average, but for your trading you can substitute the day period with the chart timeframe you are cfd with.

To Calculate RSI CFD Indicator:
  • The number of days that a cfd market is up is compared to the number of days that the cfd market is down in a given time period.
  • The numerator in the basic formula is an average of all the cfd sessions that finished with an upward cfds price change.
  • The denominator is an average of all the down cfd sessions closes for that period.
  • The average for the down days are calculated as absolute numbers.
  • The Initial RSI is then turned into an oscillator.

Sometimes very large up or down movement in cfds price in a single cfd session cfds price period may skew the calculation of the RSI average and produce a false cfd signal - whipsaw cfds trading signal - in the form of a spike.

RSI Center-line: The center-line for this cfd indicator is 50. A value above 50 implies that the cfd market cfd trend is in a bullish phase as average gains are greater than average losses. Values below 50 indicate a bearish phase in the cfd market prices are generally closing lower than where they opened.

Overbought and Oversold Levels: Wilder set the RSI overbought and oversold levels at which the cfd market moves are overextended at 70 and 30.

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