Are you constantly examining and re-examining your Forex trading plan? Do you play around with a variety of trading indicators when it seems as if your current strategy needs a little fine-tuning? The Forex market is considered a volatile market, and any number of environmental, social and political events can influence the value of currency over both the short and long term. What works today may need adjusting tomorrow. If you are not already aware of this fact, let me emphasize it again. Sticking to one and only one trading indicator for your entire duration as a trader is probably not going to work.
One time-tested, valuable trading indicator that does work, in fact, what many consider the best trading indicator out there is the Relative Strength Index, or RSI for short.
The concept behind the RSI is a relatively simple one. With the RSI, you chart the course of your currency pair over a specific period of time; initially the time period was fourteen days, but that is where the tweaking and fine-tuning comes in. The time period can be adjusted by you to anything else you want it to be. Nine day periods are common, but once you become used to the RSI indicator, you can play around with the time period until you find the best one for you and current market conditions.
The RSI is an oscillating indicator that predicts future trends based on past activity. With its simple rating system of 0 to 100, you can clearly and easily see when it is time to trade. Thirty or below? Oversold. Seventy or higher? Overbought. For consistent results with the ability to tweak and fine tune, RSI is the best Forex trading indicator.
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