{"id":110737,"date":"2017-08-11T09:01:17","date_gmt":"2017-08-11T13:01:17","guid":{"rendered":"http:\/\/countingpips.com\/?p=110737"},"modified":"2017-08-11T07:18:13","modified_gmt":"2017-08-11T11:18:13","slug":"top-3-technical-tools-part-2-relative-strength-index-rsi","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/08\/top-3-technical-tools-part-2-relative-strength-index-rsi\/","title":{"rendered":"Top 3 Technical Tools Part 2: Relative Strength Index (RSI)"},"content":{"rendered":"
August 11, 2017<\/div>
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EWI’s senior analyst shows you a beautiful example of how supporting indicators help identify a trade setup in Halliburton (HAL). <\/span><\/h3>\n

By Elliott Wave International<\/span><\/h3>\n

“There are many different forms of technical analysis<\/em>. A completed Elliott wave pattern supported by additional evidence allows for more confident forecasts and higher probability trades.<\/em>“<\/p>\n

– Jeffrey Kennedy<\/p>\n

Trader and technical analyst Jeffrey Kennedy has more than 25 years of experience using with the Elliott Wave Principle. To support his Elliott wave analysis, Jeffrey says that 3 of his favorite technical tools are Relative Strength Index (RSI), MACD, and Japanese candlesticks.<\/p>\n

This 3-part series includes Jeffrey’s practical lessons and proven techniques to support his wave counts. In Part 1, we covered Japanese Candlesticks<\/a>.\u00a0Today’s video clip shows you how RSI range rules can help identify trading opportunities: Part 3 will cover MACD.<\/p>\n

This lesson, excerpted from his Trader’s Classroom<\/em> educational service, gives an overview of RSI followed by a video example. Be sure to look below the video for an opportunity to get more lessons from Jeffrey Kennedy.<\/p>\n

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Buying pullbacks in uptrends and selling bounces in downtrends are great ways to trade trending markets.<\/p>\n

Developed by J. Welles Wilder, Jr. and presented in his 1978 book, “New Concepts in Technical Trading Systems,” RSI measures the strength of a trading vehicle by monitoring changes in closing prices and is considered a leading or coincident indicator. Andrew Cardwell popularized RSI as a trading tool by introducing the concept of range rules.<\/p>\n

The theory behind range rules is that countertrend price action in trending markets has specific momentum signatures. RSI, for example will find support within roughly the 50-40 region when pullbacks in uptrends occur. Conversely, when bounces develop in downtrends, RSI will meet resistance in the 50-60 area.<\/p>\n

Taking the path of least resistance is a benefit of trading in the direction of the trend. Moreover, the use of RSI and application of Andrew Cardwell’s range rules help identify when a trader can rejoin the trend.<\/p>\n