Range Trading with RSI Indicator

In this article we will learn range trading with RSI Relative Strength Index indicator. Forex traders usually concentrate on market trend , but sometime they may get times where Forex pair move in sideways. These situation are noticed as ranging markets and are generally marked on a Forex chart by determining horizontal levels of resistance and support.

In this article we can find an example chart of a range market. Support level is made by connecting a series of market lows. Resistance level is made by connecting a series of market highs. With these range areas we can then proceed with range trading plan to long or short at these specific price levels. To better entries we will be using RSI Forex indicator.

Relative Strength Index is a great indicator, this indicator can be traded in both range and trending market. Momentum is key and we can see on the following Forex chart that the previous RSI signal gave us to short resistance as Relative strength index traded from overbought areas. As market price trading bearish Forex traders can find for a right signal to buy the currency pair at support if Relative strength index indicator becomes oversold.

Range traders like trading in a Forex market without a clear market prediction. Forex traders can long and short between resistance and support levels until market price breaks the support or resistance level. Since there is a chance of a breakout, range trader set a stop when trading. They set stop orders outside of support when long or resistance when short.

Using the Relative strength index with the graph, my suggestion is to short the currency on a reverse from overbought areas. New positions cam target range support with stop loss level plotted above of resistance level. Profit target could be plotted close support.