RSI_Slowdown Indicator For MT5
Table Of Contents:
- RSI_Slowdown Indicator For MT5
- What is Relative Strength Index (RSI)?
- Oversold - Overbought
- How to Interpret RSI_Slowdown Indicator For MT5
- Simple Profitable Trading System Using RSI_Slowdown Indicator For MT5
The RSI_Slowdown Indicator For MT5 is a momentum oscillator that pinpoints areas in the overbought or oversold zone where an underlying asset’s price begins to stagnate. The RSI_Slowdown Indicator is based on the classical and highly popular Relative Strength Index (RSI).
What is Relative Strength Index (RSI)?
The Relative Strength Index (RSI) measures the rate at which the price of an underlying asset is changing. First propounded by J. Welles Wilder in 1978 classic trading book, the RSI fluctuates between 0 and 100, with readings below 30 indicating an “oversold” market, while those above 70 represent “overbought” conditions.
Oversold - Overbought
The RSI curve oscillates between 0 and 100. A reading of “0” signifies that the underlying asset’s price has fallen on all of the days under consideration, while an indicator reading of “100” indicates that price has risen on all the days. Wilder recommended short term traders to consider values below “30” as “oversold” and those above “70” as “overbought.” However, traders need to remember that these levels are relative, and can differ from market to market depending on the inherent volatility.
How to Interpret RSI_Slowdown Indicator For MT5
The RSI_Slowdown Indicator For MT5 is based on the idea that any reversal in price is preceded by a decline in the RSI’s rate of change. For this purpose, the indicator scans for intervals where prices begin to lose momentum in the overbought area (above 90) or oversold zone (below 10) of the RSI indicator. These areas on a chart where prices start to stagnate are marked with arrows. Each time the RSI_Slowdown Indicator For MT5 prints an arrow on the price chart, an alert is sent to the trader’s email id and mobile device.
Blue colored arrows denote areas in the overbought zone where bullish price momentum has stalled. These can be treated as potential short entry levels. Magenta colored arrows point to areas in the oversold zone where bearish price momentum has tapered. These can be treated as likely long entry signals.
Simple Profitable Trading System Using RSI_Slowdown Indicator For MT5
We combine two of Welles Wilder’s most popular indicators – RSI and Parabolic SAR - to create a trading system that attempts to flow with the broader market trend. We first draw the Parabolic SAR on a larger time scale (1 hour chart) to ascertain the direction in which prices are moving. If price is above the SAR, the trend is up, and vice versa. We next switch to the 15 minute chart to pinpoint our trade entry. If the trend on the larger time frame is up, we only look for long trades by waiting for the RSI_Slowdown Indicator For MT5 to generate magenta colored arrows. Contrarily, in case of a down trend, which gets confirmed by price below SAR on the hourly chart, our bias is for short trades. The exact entry is signaled by the first blue colored arrow on the 15 minute time frame.
The above strategy has been applied and found to be profitable in Forex trading. However, that does not suggest that its utility is limited to the currency market. The underlying principles of technical trading remain the same, and the RSI_Slowdown Indicator For MT5 can be successfully employed to trade any major underlying asset.