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With numerous tools available on electronic platform, FOREXYARD can sometimes be a daunting task when it comes to choosing the right one, or combination thereof. A discussion on the use of two tools that work similarly therefore be discussed in this document. Both tools that are explained in this article are the Relative Strength Index or RSI, William Percent Range indicator and the percentage range. These two indicators work similarly to inform the trader when a pair of currencies or commodities sold or bought more and experience the correct pressure.
The relative strength index is known as an oscillator, as it follows along with the price of the couple, but in a separate area on the table. It has two lines running through it the mark of 30 and 70 located on the right side of the oscillator (red circle). The area above line 70 (marked by the number 1) the territory is known as ‘overbought’. The area below the line 30 (marked by the number 2) is also known as the "oversold territory."
Each time the line in the RSI rises above or below these lines, the price is known to be floating in the territory and therefore over-bought/sold feeling the pressure in the opposite direction. As you can see from the chart above, when the price rose above the line 70 corresponding price movement shortly after the general in a downward direction. Similarly, when the line was below the line of RSI of 30 movements immediately after it was usually in an upward direction.
The RSI does not guarantee that the price will move in the opposite direction. It is known as a leading indicator of price behavior which means giving a reading of overbought or oversold, suggesting a correction will happen, but the correction usually only occurs soon after, and that the measure can be very large but a small fluctuation in the trend. That must be considered with other tools such as stochastic or MACD.
William Percent Range indicator is the second one described here. This is an oscillator that indicates when an asset is overbought or oversold, so only a slightly different way. As indicated, the William Percent Range indicator also has a territory of more than buying and selling, but not marked on the oscillator itself. The trader should be aware that these areas are included in the area above the level of 20 percent below the 80 percent level, respectively. The lines have been developed partly in the table above to understand this a little easier.
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