Relative Strength Index RSI

Relative Strength Index RSI

Relative Strength Index RSI

Indicators cannot be skipped when we’re talking about binary options trading. There are so many of them and they provide you with so much data that you simply cannot be a serious trader without using at least one of them. One of the most important indicators in the world of trading is the so-called relative strength index (RSI for short) and we are going to explain to you how to use it. Some knowledge is necessary, though, if you want to be able to properly understand the following paragraphs, so if you’re a complete beginner take a look at our more basic articles. If not, just keep reading!

Relative Strength Index RSI | Basic features

A good indication of the importance of the relative strength index (not to be confused with Relative Vigor Index) is the fact that it can be found on literally every trading platform. It will always be plotted at the bottom of your screen and will usually be adjusted to the 14 periods by default. This means that it will take into consideration your last 14 candles, extract the data from their closing levels and show you the results on your Chart. Obviously, you can adjust this parameter any way you want, but a lot of traders prefer to leave it as it is, especially if they don’t have too much experience. But how exactly do we use the RSI? Stay with us and you’ll find out very soon.

Relative Strength Index RSI | Using it

Two lines are what the relative strength index is all about: the one at the 70 mark and the one at 30 marks. These represent overbought and oversold levels respectively, so they can tell show you what your next move should be when the RSI crosses these thresholds. In other words, put options should be what you invest in if the index is above 70, but if it’s below 30 call options are a reasonable bet. This strategy has proven to be the most efficient when used with consolidating markets, i.e. those markets that are in a range when you’re examining them. It is also a good idea to combine the RSI with other analytical tools in order to get confirmation and more useful data from your chart.

Relative Strength Index RSI | Conclusion

The relative strength index is one of the most important indicators you can find in the binary options business, but don’t let that scare you – it’s actually fairly simple to use. The 70 and the 30 levels are what you need to be aware of at all times and react once the index passes those points. However, do keep in mind that this is recommended to use with consolidating markets since the success rate is much higher then. That’s it for this article, but if you want to learn more about trading, we have loads of other helpful texts here on our website, so feel free to browse around.


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Author: Ben Prescott

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