RSI is an oscillator indicator while moving average is a trend indicator.
Today being Wednesday August the 14th of 2019, the USD/JPY market has been in a bearish trend most of the time.USD/JPY market has managed to fall below 105.771. The question is will this bearish trend continue or will the USD/JPY market reverse and become a bullish trend.This is indicated from the candle sticks chart below;
From the candlesticks chart above, there is point A which is located along the RSI and point B located along the moving average. Although the USD/JPY market has been in a bearish trend most of the time and we don't know whether the USD/JPY market will continue to be in this bearish condition or it will reverse and become a bullish trend, we can use the concept of RSI and moving average to predict the direction of the USD/JPY market for the remaining time.
Concept of RSI
Using the concept of RSI, the market is normally considered to be overbought if the RSI rises above 70 and oversold if the RSI falls below 30. At point A, the RSI has fallen below 30 thus an indication of an oversold USD/JPY market condition.Although the USD/JPY market has been bearish today and managed to fall below 105.771, we can decide to follow the concept of RSI and open a buy position because at below 30, that is an indication of an oversold market condition thus the USD/JPY market will reverse and start an upward trend.
Concept Of Moving Average
Using the concept of moving average ,the market is considered to experience a reversal trend 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 fallen below the lowest low of a moving average thus an upward reversal trend has started to take place. Although today the USD/JPY market has been in a bearish trend and managed to fall below 105.771, We can decide to follow the concept of moving average because the price has fallen below the lowest low of a moving average and open a buy position. Here is how our trading idea for USD/JPY buy market looks like today;
BUY 105.771 T/P 106.171 S/L 105.371
Make sure to apply risk management while opening your position because this is not an investment advice but just a trading idea
