The traditional use of the RSI indicator is to tell when the forex market is overbought or when it is oversold that is, any reading below 20 indicates that the market is oversold and any reading above 80 indicates that the market has been overbought but mind you in forex trading as you should have known by now that no indicator is to be used in isolation, you are to also consider the readings of other indicators,and one indicator that I use that I have found to be very effective in combination with MACD and RSI is the stochastic oscillator.
Here is how I use these indicators I look at where RSI is in relation to its watermark that is for example if RSI is below its watermark I know we are in a down trend and if it is above its watermark or 50 line then I know we are in an uptrend then of course I check macd for divergence and also check stochastic to see if we are overbought or oversold traditionally any reading below 30 indicates an oversold condition for the market and any reading above 70 indicates an overbought condition for the market.
The RSI is a very simple technical tool that can be used in conjunction with other indicators to make a trading decision and lock in profits from the forex market. Note here off course that to enter into any position in the forex market it is best to enter at the break of a pivot point as this is the safest place to enter a trade according to my experience in trading the forex. understanding the RSI can be one step to success in your trading
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