RSI Gold Trading Strategies
- RSI Overbought and Oversold Levels
- Relative Strength Index Divergence Setups
- RSI Classic Bullish and Bearish Divergence
- RSI Hidden Bullish and Bearish Divergence
- Swing Failure Strategy
- RSI Gold Trading Chart Patterns Gold Trading Trend Lines
- RSI Summary
Relative Strength Index Indicator Gold Trading Strategy
Relative Strength Index or RSI is one of the most popular gold trading indicator used in Gold trading. It is an oscillator gold trading indicator which oscillates between 0 -100. This a gold trading trend following gold trading indicator. It indicates the strength of the gold trading trend, values above 50 indicate a bullish gold trading trend while values below 50 indicate bearish Gold trend.
RSI Gold Trading Indicator Measures Momentum of a Gold Trend.
The center-line for the RSI is 50 gold trading indicator, crossover of the center-line indicate shifts from bullish to bearish gold trading trend and vice versa.
Above 50, the gold buyers have greater momentum than the gold sellers and gold price on the gold trading chart will keep going up as long as this RSI gold trading indicator stays above 50.
Below 50, the sellers have greater momentum than the buyers and gold price on the gold trading chart will keep going downwards as long as RSI gold trading indicator stays below 50.
RSI Gold Trading Indicator - How to Trade Gold with RSI Gold Trading Indicator
In the gold trading example above, when the gold trading indicator is below 50, the gold price kept moving in a downward gold trading market trend. The gold price continues to move down as long as RSI indicator was below 50. When the RSI gold trading indicator moved above 50 it showed that the momentum had changed from sell to buy and that the downward gold trading trend had ended.
When the RSI gold trading indicator moved to above 50 the gold price started to move upwards and the gold trading trend changed from bearish to bullish. The gold trading chart gold price continued to move upwards and the RSI indicator remained above 50 afterwards.
From the gold trading example above, when the gold trading 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 gold trading price gold trading trend was generally upwards. As long as RSI indicator does not move to below 50 the current gold trading trend remains intact. This is the reason the 50 center line mark is used to demarcate the signal between bullish and bearish gold trading signals.
The RSI gold trading indicator uses 14 day period as the default period, this is the period recommended by J Welles Wilders when he introduced it. Other common periods used by Gold traders are the 9 and 25 day moving average.
The RSI indicator period used depends on the gold trading chart time frame you are using to trade, if you are using day gold trading chart time frame the 14 period will represent 14 days, while if you use 1 hour gold trading chart time frame the 14 period will represent 14 hours. For our gold trading example we shall use 14 day moving average, but for your trading you can substitute the day period with the chart time frame you are gold trading with.
To Calculate RSI Gold Trading Indicator:
- The number of days that a gold trading market is up is compared to the number of days that the gold trading market is down in a given time period.
- The numerator in the basic formula is an average of all the gold trading sessions that finished with an upward gold price change.
- The denominator is an average of all the down gold trading 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 gold price in a single gold trading session gold price period may skew the calculation of the RSI average and produce a false gold trading signal - whipsaw signal - in the form of a spike.
RSI Center-line: The center-line for this gold trading indicator is 50. A value above 50 implies that the gold trading market gold trading trend is in a bullish phase as average gains are greater than average losses. Values below 50 indicate a bearish phase in the gold trading market gold prices are generally closing lower than where they opened.
Overbought and Oversold Levels: Wilder set the RSI overbought and oversold levels at which the gold trading market moves are overextended at 70 and 30.