RSI Notes

The Relative Strength Index compares upward movements in closing price to downward movements over a selected period. Wilder originally used a 14 day period, but 7 and 9 days are commonly used to trade the short cycle and 21 or 25 days for the intermediate cycle.

Ranging Markets

Set the Overbought level at 70 and Oversold at 30.

• Go long when RSI falls below the 30 level and rises back above it 
  or on a bullish divergence where the first trough is below 30.

• Go short when RSI rises above the 70 level and falls back below it 
  or on a bearish divergence where the first peak is above 70.

Trending Markets

Only take signals in the direction of the trend.

• Go long, in an up-trend, when RSI falls below 40 and rises back above it.

• Go short, in a down-trend, when RSI rises above 60 and falls back below it.