Many Forex traders have heard about RSI, the Relative Strength Index in particular from traders who evaluate a trade in the currency market and then say there is a divergence forming and that the price of a currency is overbought or oversold. When you hear this you should cover your ears or eyes and make loud noises until the person stops talking.

RSI does point out divergences between price and momentum but divergences are very inconsistent to trade. Ask anyone who has tried to trade them. Secondly, most traders including experts miss most of the divergences on the chart because they try to locate them manually, third, RSI does not predict price as being overbought of oversold. Last, little known RSI Reversals drawn by The RSI Paint Indicator tell the Forex trader when momentum is shifting in his or her favor.

Divergences are inconsistent to trade

Divergences are actually, in most cases, signals that momentum is slowly and about to retrace. They are inconsistent because they are against the trend and because trend strength is so difficult to measure.

Most traders can not find all the divergences

When you are personally locating the divergences on RSI and Price you will miss most of them. The only way to locate them all is to use an RSI Indicator that places them all for you. In this way the computer does the work regardless of how many currency pairs you are trading. The RSI Paint Indicator was designed to do just that plus much more which we will point out shortly.

RSI does not predict overbought and oversold

Statistical data shows that the best place to sell is not at 70 RSI and buy at 30 RSI. Following this prescription will lead to failure. Successful RSI signs however relative to their levels can be tracked so as to put RSI traders in position to make highly successful trades. How?

RSI Reversals, the key to success

Few people including the so called experts understand RSI Reversals. The RSI Paint Indicator draws these on the RSI so that the Forex trader can locate them in order to trade "with" the trend. They are the counter signal to divergences. When a trader sees divergences they will know that in most cases the next signals to watch for are reversals which signal moment in the direction of the trend. Both of these signals, divergences and reversals, are automatically drawn for the trader using The RSI Paint Indicator.

Traders who look deeper than the typical information on RSI on most websites will find that RSI provides information that will allow a trader to trade RSI as a standardone system, in particular, when the signals that are the key to success are drawn for them using The RSI Paint Indicator.

Source by Paul W. Dean