GBPMXN slaughter – power of the Relative Strength Index

The relative strength index (RSI) is an indicator used in what’s called ‘technical analysis’. As with most things you read it, you see it, you play with it, and you think you understand it. But for me  – as happened recently – the power of the concept suddenly came home in live trading. My eyes are now open to a new appreciation and understanding.

This is not a tutorial on the RSI. This is not a spoon-feeding site! You go off and direct your own learning. Only a basic start off is given in links and video below.

Before I go any further I want to over-emphasise, that no one indicator gives you the magic solution to making loadsah money!! Indicators only put give you information. The ‘picture’ you paint – how you interpret that information – is for you to do. So, indicators don’t work ‘for you’ – you work with them. And therefore how well you paint the pictures, is a learning process derived from direct interaction with the markets. NewTrader recommends demo accounts as an essential part of self-training.

I’ll start off by showing an annotated chart below. It’s best to click on it and zoom/scroll around to see some of the important annotations in small text. 

FINALLY – the GBPMXN pair is an extremely volatile pair. Price can change by 2500 points 10 – 15 mins, unlike the EURUSD which might only change 10 – 50 pts in that time.  So this is absolutely not recommended for betting in live accounts. Whilst most coaches – and I’m not one – will say avoid these ‘exotic pairs’ entirely if you’re a new trader, I think differently. If you want to learn about volatility and the risks involved these can be practised on demo accounts. A play on these exotics would be a very careful snipe with massive stop-losses. But on demo accounts you’re not too worried about losses. You’re there to learn stuff – and to make loads of mistakes in a risk-free environment.

 

1. Investopedia on RSI.

2. Investopedia on ‘Overbought or oversold

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