How Relative Strength Index Can Raise Your Earning

One of the basic and simple strategies is based on the relative strength index (RSI). The RSI refers to oscillators, which means that it always gravitates within a certain range of values and tends to stick around the middle. As the values range for the RSI extends from 0 to 100, the middle is found at the level of 50. Apart from the above notions, the index also concerns so called overselling and overbuying zones. The thresholds of the zones stay at around 30 and 70 respectively.

Graphically, the RSI is represented in three lines: the overselling threshold, the middle, and the overbuying threshold.

The midline might be in a constant movement from the top to the bottom and vice versa or just straight. If the indicator is below 30 it says about a soon demand for the underlying asset and, consequently, an increase of its price. So, you have just got a signal for a call binary option trade. If the indicator is above 70, it means that the market is about to sell out the underlying active, which will lead to a decrease in its price. Here, you have a signal to put option trade.

Therefore, employing the RSI strategy we are looking for leading signals for a trend’s shift. To be sure about the fact that the trend has already been formed you should set a certain RSI’s calculation period. For minute and five-minute charts, for example, the calculation period would equal to 5 candles (the candle indicates both opening and closure asset’s price and maximum and minimum rates for the period).

Thus, the RSI is an effective and, at the same time, simple strategy for binary options trading. However, before applying it, you should consider its weak points. The signals for a trade are linked to the specific levels of the index range; so, other sensible entry points are just ignored. Besides, the signals appear quite rarely. Nowadays, there is a variety of modifications of the RSI strategy used in binary options trading. You can try a new one each time and apply the most suitable in a given market situation.