RSI Overbought Oversold Indicator

RSI Overbought Oversold Indicator

Spot potential buy-sell signals using the best RSI overbought/oversold MT4 indicator. Plots arrow signals in critical market highs and lows. Suits MTF trading.

Categories: MT4,

The RSI Overbought Oversold Indicator generates highly probable buy-sell signals following correct market momentums. It applies a unique configuration of the relative strength index for determining upcoming price movements.

Technical analysts use RSI as a momentum indicator to assess whether a security’s price is overvalued or undervalued. It evaluates the speed and amplitude of recent price fluctuations. Beyond identifying overbought and oversold markets, this indicator delivers additional price-action information. It signals assets poised for a price correction or trend reversal.

This article will discuss how to make precise trading decisions using the RSI Indicator in MT4.

How to trade forex and stocks using the RSI Overbought Oversold Indicator for MT4
The RSI Overbought Oversold Indicator plots arrow signals whenever the price reverses from a critical market high or low.

Once the chart prints an arrow, we need to assess its validity using some basic price action theory. For instance, the indicator signals a bullish momentum while the price rejoins an uptrend plotting a higher low indicates a buy entry.

In the above hourly chart, GBP/USD initially failed to exceed the resistance at 1.2143. Later, the price returned to the resistance again and developed a large bearish pin bar. At the same time, the indicator delivered a down arrow above the respective bearish candle, confirming a sell signal.

The RSI Overbought Oversold Indicator may generate inconsistent signals during choppy markets. So, it is essential to deeply assess trends and levels before confirming a trade entry.

Conclusion
The RSI Overbought Oversold Indicator can be applied in multiple trading strategies. Besides trend reversals, it also determines pullbacks and the strength/weakness of the market trends. We recommend you combine the RSI arrow signals with fixed or dynamic support/resistance for better results.