Relative Strength Index Gold Analysis and RSI Signals

Developed by J. Welles Wilder, explained in the book "New Concepts in Technical Systems".

RSI indicator is the most popular trading indicator & it is a momentum oscillator & a gold trend following indicator. RSI compares and analyzes a price magnitude of the recent price gains against the magnitude of recent losses 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 readings below 50 center-line signify bearish momentum.

Relative Strength Index Indicator - Relative Strength Index - How to Interpret RSI Indicator

RSI indicator is drawn as a green-line
Horizontal dashed lines are drawn to spotting overbought and over-sold levels are i.e. 70/30 levels respectively.

Gold Trading Analysis & How to Generate Signals

There are various methods used to trade, these are:

50-level Crossover Signals

Buy trade signal - when the technical indicator crosses above the 50 center line a buy/bullish trading signal is generated.
Sell Trading Signal - when the indicator crosses below the 50 mark a sell/bearish signal is given.

Best RSI Indicator Combination - How Do I Analyze RSI Indicator?

RSI Setups

Traders can draw trendlines & map out chart patterns on the RSI indicator. The RSI often forms chart patterns such as head & shoulders chart pattern which might not have formed clearly on the price chart.

Gold Support/Resistance Breakouts

RSI is a leading indicator & can be used to predict the Support & Resistance Break Outs before the price breaks its support/resistance zone. RSI uses swing failure signal to predict when the price is about to break support and resistance zones.

Support & Resistance Breakout - Relative Strength Index - What is RSI Indicator?

Swing Failure - Support and Resistance Break Out

Over-bought/Oversold Conditions on Indicator

Over-bought levels above 80
Oversold- levels below 20

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

Divergence Trade Setups

Divergence trading is one of trading analysis method used to trade the reversals of the market trends. There are 4 types of divergences that can be transacted with this trading indicator covered and discussed in the divergence tutorial on this web site.

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