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Relative Strength Index Gold Trading Analysis and RSI Gold Trading Signals

Developed by J. Welles Wilder, described in the book “New Concepts in Technical Trading Systems”.


RSI is the most popular indicator and it is a momentum oscillator and a gold trend following indicator. RSI compares a gold price magnitude of the recent xauusd price gains against its magnitude of recent losses xauusd price losses and plots this data on a scale of values that ranges between 0-100.


RSI measures the momentum of gold; values above 50 signify bullish momentum while values below 50 center-line signify bearish momentum.


Relative Strength Index XAUUSD Indicator



  • RSI is drawn as a green line

  • Horizontal dashed lines are drawn to identifying overbought and oversold levels are i.e. 70/30 levels respectively.



XAUUSD Trading Analysis and Generating XAUUSD Trading Signals


There are several methods used to trade, these are:


50-level Crossover Signals


  • Buy signal - when the indicator crosses above 50 a buy/bullish signal is given.

  • Sell Gold Trading Signal - when the indicator crosses below 50 a sell/bearish signal is given.


RSI Technical XAUUSD Indicator Buy Sell XAUUSD Trading Signals


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RSI Gold Trading Chart Patterns

Traders can draw gold trend lines and map out xauusd chart patterns on the RSI indicator. The RSI often forms xauusd chart patterns such as head and shoulders xauusd chart pattern which might not have formed clearly on the xauusd price chart.


Trading Support/Resistance Breakouts

RSI is a leading indicator and can be used to predict Support/Resistance Breakouts before xauusd price breaks its support/resistance level. RSI uses the swing failure signal to predict when xauusd price is about to break support and resistance levels.

Support and Resistance Breakout

Swing Failure - Support and Resistance Breakout



Overbought/Oversold Conditions


  • Overbought- levels above 80

  • Oversold- levels below 20



These levels can be used to generate gold trading signals such as when RSI turns up from below 20 after oversold, buy and sell when RSI crosses to below 80 after overbought, sell. These signals are not suitable for trading Gold because they are prone to a lot of whipsaws.


Divergence XAUUSD Trading Setups

Divergence trading is one of the technical analysis method used to trade reversals of the xauusd price trends. There are four types of divergences that can be traded with this indicator covered in the divergence tutorial on this website.

 

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