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.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Mixed
USD/JPY
Mixed
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
Gold
Bearish
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • RT @ClevelandFed: #LorettaMester: My current view is that monetary policy is well-calibrated to support our dual mandate goals, and a patie…
  • RT @PowerLunch: Restrictions in China are still tight as the country faces the Coronavirus. @onlyyoontv tells us more about authorities co…
  • Well, that was not a very encouraging day for capital markets. Remember, flat is also an option in the markets
  • Indices Update: As of 21:00, these are your best and worst performers based on the London trading schedule: Wall Street: 0.02% US 500: 0.01% Germany 30: -0.45% France 40: -0.52% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/JkDZ0UQlwb
  • Gold prices have remained bid for much of the past two weeks, and of recent, as that risk aversion theme has further priced-in to global markets. Get your $XAUUSD technical analysis from @JStanleyFX here: https://t.co/ylBpk8vHvX https://t.co/mRbft4222q
  • #Crypto update: $BTC -2.9% $BCH -6.3% $LTC -5.5% $XRP -4.9% $ETH -3.2%
  • US Recession Watch: Recession Odds Rekindled as Coronavirus Festers -via @DailyFX https://www.dailyfx.com/forex/fundamental/article/special_report/2020/02/24/us-recession-watch-recession-odds-rekindled-as-coronavirus-festers.html
  • $USDMXN just notched its highest reading since December 11 following a 3.5% surge in the US Dollar relative to the Mexican Peso over the last four trading sessions. Get your market update from @RichDvorakFX here: https://t.co/POi477sNJD https://t.co/ROlw5QKQhq
  • Fed's Mester says US monetary policy is well calibrated, does not support a rate cut at this time $DXY
  • The price... the price is always right. Sometimes the changes just seem to come from outta nowhere https://t.co/myouqWeEKb https://t.co/D8uuvP5VH0
RSI: Oversold/Undersold

RSI: Oversold/Undersold

2010-07-28 20:09:00
Richard Krivo, Trading Instructor
Share:

Student's Question:

Looking at the charts regarding the RSI indicator, when I go long because the indicator reached 30, it still keeps dropping. What am I doing wrong?

Instructor's Response:

Keep in mind that because the RSI reaches 30 or even goes below 30 (an area referred to as being Oversold) does not mean that the pair is immediately going to begin a bullish move to the upside. Being in oversold territory is not a signal to enter a long position and buy the pair. When a pair is "oversold" it can become even more "oversold". Take a look at the chart below for a visual on this...

Note that after the RSI touched 30, the pair still dropped almost 200 pips. Based on the RSI, the time to take a long position is after the RSI moves back above 30.

RSI_Oversold_Undersold_body_chart_7_28_10.png, RSI: Oversold/Undersold

The strongest buying signal that is generated by the RSI is when the pair has been below 30 and then moves above 30. The strongest selling signal that is generated by the RSI is when the pair has been above 70 and then moves below 70. These movements back above 30 and back below 70 are critical when interpreting this indicator and using it to time an entry.

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

DISCLOSURES

News & Analysis at your fingertips.