News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • Traders tend to overcomplicate things when they’re starting out in the forex market. This fact is unfortunate but undeniably true.Simplify your trading strategy with these four indicators here:https://t.co/A4dqGMPylo https://t.co/yZzArpGs2h
  • GBP turbulence persists as investors eye the next round of EU-UK Brexit negotiations. Cautious optimism signals a deal is near. Get your #currencies update from @JMcQueenFX here: https://t.co/WjU4oYpmf7 https://t.co/VcNnCjm0B2
  • An economic calendar is a resource that allows traders to learn about important economic information scheduled to be released. Stay up to date on the most important global economic data here: https://t.co/JdvW6HNuqV https://t.co/AiLoS7DrEQ
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/3Wked6GBOp https://t.co/HicBmGrokK
  • There is a great debate about which type of analysis is better for a trader. Is it better to be a fundamental trader or a technical trader? Find out here:https://t.co/7kPzAoNoLG https://t.co/5lbyBJeeA7
  • Entry orders are a valuable tool in forex trading. Traders can strategize to come up with a great trading plan, but if they can’t execute that plan effectively, all their hard work might as well be thrown out. Learn how to place entry orders here: https://t.co/lAFyv1gM0P https://t.co/ubLimoYAcr
  • What is the outlook for financial markets ahead of the first presidential debate and how are Democratic nominee Joe Biden and President Donald Trump doing in the polls? Find out from @ZabelinDimitri here:https://t.co/QQwAZTxZFg https://t.co/4cRhRCiv3C
  • The US Dollar could gain as it forms bullish technical formations against the Singapore Dollar and Malaysian Ringgit. USD/PHP may have bottomed, will USD/IDR rise next? Find out from @ddubrovskyFX here:https://t.co/3UIKmbLIvD https://t.co/PY2YyH4vkQ
  • The Indian Rupee may be at risk to the US Dollar as USD/INR attempts to refocus to the upside. This is as the Nifty 50, India’s benchmark stock index, could fall further. Get your $USDINR market update from @ddubrovskyFX here:https://t.co/3wsYlSxd26 https://t.co/z2qB9p8IgX
  • A proxy of #EmergingMarket capital flows hit its lowest since July, falling with the #SP500 after some divergence This is as #USD gained against its developing FX counterparts, highlighting potential risk of a spillover outwards Stay tuned for next week's #ASEAN fundy outlook! https://t.co/kAvpnb0EXO
Setting the Time Frame for the RSI

Setting the Time Frame for the RSI

2010-01-05 00:09:00
Richard Krivo, Trading Instructor
Share:

Instructor's Response:

The default setting used by most traders for the RSI is 14. That means that the indicator will go back 14 periods or time frames based on the chart being used (14 days on a Daily chart, 14 hours on an hourly chart and so forth) and make its calculation based on that.

Personally, I believe that particular setting (14) would suffice in the majority of trading scenarios.

You asked about using a longer or shorter setting for the indicator...

For longer term trading the number might be increased but, as mentioned in the lesson, fewer trading signals will be generated but they will have a greater level of reliability associated with them...the same as using a longer term chart versus a shorter term chart for example.  Conversely, if you lessen the number of periods in the equation, more trading signals will be generated but they will have a lower level of reliability...just like using a shorter time frame chart lowers the reliability of the signals it provides.


Take a look at the chart below for a visual on this...

chart 1 04 10


(Just by way of a quick review, the RSI gives a buying signal when the it has been below 30 and then closes above 30.  The selling signal is provided from RSI when it has been above 70 and then closes below 70.)

The first RSI on the chart is the standard 14 period version.  Based on the above criteria, a buying or selling signal was generated in each of the red circles for a total of 5 signals.

On the second version below we have shortened the number of periods to 9.  As can be seen, the indicator becomes much more sensitive and the difference in the number of signals generated is readily apparent.  The total number of signals on this version is 12.  If one compares the signals themselves to the price action on the chart, we can see that some of the signals were valid and would have generated pips while others were simply a short lived blip on the chart...a false entry, if you will.

The last version of the RSI is set at 25 periods.  We can see the smoothing effect that increasing the number of periods has. Also, we note that not one RSI signal is generated during the time frame encompassed by the chart. When a signal does appear, however, it will have greater level of reliability behind it than either the 9 or the 14 period.

After all of the above is said, a trader can set the period to whatever they find best serves their trading style and strategy.  This can be accomplished through experimention with various time frames and logging the results. However, the 14 period gets my vote for the trading style employed by the majority of traders.

 

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES