Rsx Indicator For MT4
Table Of Contents:
- Rsx Indicator For MT4
- How to Interpret Rsx Indicator For MT4
- How to Trade Using Rsx Indicator For MT4
Nick Bilak’s Rsx Indicator For MT4 is a momentum oscillator that highlights overbought-oversold levels in an underlying asset’s price. The indicator achieves this by comparing the location of current price in relation to where price was in the past.
How to Interpret Rsx Indicator For MT4
The Rsx Indicator For MT4 is set to a default time frame of 14 periods. Nick Bilak claims that the Rsx is a significant improvement to the much more popular RSI oscillator. Unlike the RSI, the Rsx Indicator supposedly eliminates noise completely.
Typically, any indicator can be smoothed by applying a moving average. However, one big drawback of such a method is that it creates a time lag between the indicator and price. Rsx Indicator For MT4 enables price smoothing without resulting in any signal delay. This creates more reliable trading opportunities and reduces false entries. The power of Rsx is depicted in the below chart of EURUSD, where the indicator is plotted along with the RSI oscillator. Just notice how the Rsx is better at pinpointing price peaks and price troughs; that too without any time lag.
How to Trade Using Rsx Indicator For MT4
Trading signals generated by the Rsx Indicator For MT4 can be classified in to four broad categories:
1. Oversold - Overbought
The Rsx fluctuates between 0 and 100. A reading of “0” indicates that the underlying asset’s price has fallen on all the days under consideration, and “100” signifies that price has risen on all the days. Short term traders should consider values below 30 as “oversold” and those above 70 as “overbought.” However, traders need to remember that there is no “one size fits all” in technical trading. What works in one market need not necessarily work in another. Hence, adjusting the oversold-overbought levels to mirror a given asset’s volatility is recommended.
2. Rsx - Price Divergence
Divergence between Rsx Indicator and an underlying asset’s price provides the earliest signal of a reversal in trend. A bullish divergence is said to have occurred when price makes a lower swing low while Rsx plots a higher low. On the other hand, a bearish divergence happens when price prints a higher swing high and the indicator makes a lower high. Notably, divergences are not standalone signals and should always be confirmed by supporting price or indicator action.
3. Rsx Trendline Break
Just like price charts, trendlines can also be drawn on the Rsx Indicator, a break above/below is likely to reveal the short term direction of the market. Two or more swing highs on the Rsx Indicator can be joined to form a down sloping trendline; while connecting two or more swing highs produce an upward sloping trendline. Rsx trendline breaks often act as leading indicators of a short term price reversal.
4. Failure Swings
During highly trending markets, the Rsx Indicator For MT4 may keep moving higher despite reaching the overbought zone, or continue slipping lower even after crossing in to the oversold area. To overcome this major handicap, the concept of “failure swings” can come in handy. A bullish failure swing materializes when the Rsx closes below the oversold-mark, only to cross higher. A long position can be initiated once the indicator breaks above 50. Conversely, a bearish failure swing is said to have occurred when the Rsx goes above the overbought threshold, but fails to stay there and comes below. Traders can enter shorts on a close below the center-line.