RSI To Form An Easy Trading System
RSI provide a good
indication whether a stock is considered overbought. When RSI is
around the 70-80 level, it is considered to be overbought
condition and you should consider selling. This is because an
overbought stock since stocks often trade at higher valuations
during bull markets
is likely to fall. Likewise, if the RSI approaches 30 a stock is
considered oversold and you should consider buying.
Thus you would be able to use simple RSI to validate the
patterns and cycle for different stocks. The shorter number of
days used, the more volatile the RSI is and the more often it
will hit extremes. A longer term RSI is more rolling,
fluctuating a lot less.
We advise to us different threshold levels for Different sectors
and industries for the RSI Measurement. Backtesting the stocks
in some industries's pattern with different RSI value would
reward you with more accurate signal.
We would definitely define a simple trading system using RSI for
Short Term Trade.
If RSI(10) < 25 Buy Long
and close position when RSI(10) > 55
If RSI(10) > 80 Buy Short
and close position when RSI(10)<55
Author by Charles Carr Website: ww.optionsxpert.com