RSI is an oscillator indicator while moving average is a trend indicator.
Today, tue the 14th august of 2019, the EUR/USD market has been in a bullish trend most of the time.EUR/USD the market has risen as high as 1.1228. This high rise has confused many traders and investors leaving them to wonder whether to continue holding their long positions or to close them and open a short position. This EUR/USD high rise is being indicated from the candlesticks chart below.
As indicated by the EUR/USD market from the candlesticks chart above, there is point A which is located along the RSI and point B located along the moving average. Despite the EUR/USD market status in a bullish trend most of the time thus confusing many traders and investors about the next market direction, we can decide to use the concept of RSI and moving average to predict the direction of the market for the remaining time.
Concept of RSI( Relative Strength Index)
Using the RSI Tip, the market is always in an overbought condition if the RSI rises above 70 and in an oversold condition if the RSI falls below 30. At point A, the RSI has risen above 70 thus an indication of an overbought EUR/USD market condition. Despite the market to have risen as high as 1.1228 due to its bullish condition, we can decide to follow the RSI Tip and open a sell position because at above 70, that is an indication of an overbought market condition thus the EUR/USD market will reverse and start a downward trend.
Concept of Moving Average
Using moving average Tip, the market will reverse if the price rises above the highest high of a moving average or falls below the lowest low of a moving average. At point B, the price has risen above the highest high of a moving average thus a downward reversal trend has started to take place. Despite the EUR/USD market to have risen as high as 0.6996, We can decide to follow moving average Tip because the price has risen above the highest high of a moving average and open a sell position. Here is how our trading Tip for EUR/USD/ sell market looks like today;
SELL 1.1228 T/P 1.1178 S/L 1.1268
Make sure to apply risk management while opening your position because this is not investment advice but just a trading idea