Relative Strength Index (RSI) is a commonly used forex indicator by intraday traders. It is very effective in generating the right signal. Every forex indicator has different settings and periods that can be used to generate the most appropriate signals. Therefore, it is important to understand the best RSI settings so traders can make the best of the intraday chart in forex trading. So in this article, I share the best RSI settings for intraday charts in forex trading.
RSI Settings For Intraday Chart In Forex Trading Explained – Traders Must Try The Best RSI Settings In Forex Trading
What Is Intraday trading?
Intraday trading or Day trading is the process of buying or selling financial assets on the same day. It has a fixed timing, and traders must close their position within that time to ensure the forex broker automatically closes the positions. For example, a trader buys a stock ‘XY’ for Rs. 200 at 09.30 AM and sells ‘XY’ for Rs. 205 at 02.00 PM. The intraday trading profit will be 5 percent.
What Is RSI?
The Relative Strength Index (RSI) is the major forex indicator to trade in 2022. J. Welles Wilder developed it. It belongs to the oscillator category or momentum indicators and ranges from 0 to 100. The main aim of this indicator is to measure the speed & change of price movements and find which direction has more strength. It is the most reliable and one of the best forex indicators in the forex market.
Formula: RSI = 100 – [100 / 1+ RS]
Role Of RSI In Intraday Trading
In 1978, RSI was first introduced in the book “New Concepts of Technical Trading System.” This book has become quite popular in generating technical trade signals for bullish or bearish price momentum. During intraday forex trading, day traders use the RSI indicators to gain profits, but some traders find it hard due to its infrequent trading signals.
Traders can able to read the RSI indicators through charts during intraday trading. It’s well-known that most intraday traders utilize RSI forex indicators for optimal results and a high reward-to-risk ratio. Day traders can find good entry and exit signals using this indicator.
It has different periods and RSI settings for intraday charts to generate the most appropriate signals. In forex trading, traders have different goals and objectives. Traders must plan their intraday trading strategies according to their goals. Depending on the intraday strategy, traders can adjust the settings of RSI. So, let’s look at the best RSI settings for intraday charts in forex trading.
Trading With RSI Settings For Intraday Trading Chart
Forex traders used RSI indicators for uncovering momentum, showing when an asset is in the overbought or oversold camp. The general scale of the RSI indicator range is between 0-100. Traders can set this RSI intraday chart strategy according to their forex trading goals. The lower band, i.e., zero, determines the oversold condition, and the upper band, i.e., 100, determines the overbought condition.
If the RSI indicator moves above 70, it is considered an overbought or uptrend forex market, while if it moves below 30, it is considered an oversold or downtrend market. In the oversold case, traders usually buy signals, and in overbought cases, sell signals. For example, if traders set RSI settings for intraday chart strategy RSI of 70-30, 50 is a potential buy signal. If the range is 80-20, the potential buying signal is around 60.
The normal default settings for the RSI indicator are 14 periods on technical charts, which means that the last 14 candles or bars are used to calculate the indications. This 14-day period is usually more efficient for swing traders. The intraday forex traders usually prefer an RSI setting ranging from 8 to 11. The best timeframe is between 2 to 6.
Short Term Trade
Short-term trading often uses lower RSI settings for intraday charts with periods in the range of 9-11. It has an RSI range above 70, i.e., overbought. The price is under a resistance zone, and traders can sell below any bearish price bar.
Medium Term Trade
Medium-term trading frequently uses the default period setting of 14, which is usually more efficient for swing traders.
Long Term Trade
Long-term trading often uses a higher RSI setting for intraday charts with periods in the range of 20-30. It has an RSI range below 30, i.e., oversold. The price is under a support zone, and traders can buy above any bullish price bar.
Below are some of the best RSI settings for intraday charts in trading.
1 Hour Chart
On a 1-hour timeframe chart, the RSI default signal is 14 periods based on the last 14 hours. Intraday traders want to bring that down to 2 to 6 timeframes. Many experienced and intermediate intraday traders use this timeframe to adjust the values based on their position.
4 Hour Chart
On a 4-hour timeframe chart, the RSI indicator chart value is between 2 to 6 timeframe and the RSI indicator lines to 80 and 20. The potential buying signal of 80-20 is around 60. RSI strategy and RSI chart timeframe decisions are more important to have comfortable trading.
5 Minute Chart
On a 5 minutes timeframe chart, the RSI default signal is 14 periods based on the last 70 minutes. RSI settings ranged above 70 and became overbought. The overbought signal formed in the resistance zone and below the bearish bar.
Stochastic RSI Settings For Intraday Trading Chart
It is best to use the combined strategy or indicators in forex trading to boost trading efficiency. When traders combine Stochastic and RSI indicators in forex trading, the trading efficiency will be high. Both are momentum or oscillator indicators and give the same signals on different timeframes.
The Stochastic strategy uses the timeframes of H4 and M15. In the H4 timeframe, RSI will have the default setting of 14 periods. The only difference will be that instead of RSI levels 30 and 70, 50 will be set in the H4 timeframe. In M15, the stochastic indicator will have default settings. In intraday trading, Stochastic-RSI fluctuates between 0 and 1. If a Stochastic-RSI reading above 0.8 is considered overbought, while a reading below 0.2 is considered oversold.
Frequently Asked Questions For RSI Settings
1. What are the best RSI settings for intraday chart trading?
The default setting of RSI is 14. The intraday trader usually prefers settings ranging from 8 to 11 periods.
2. Which timeframe is best for RSI?
The best timeframe for the RSI chart lies between 2 to 6.
Conclusion – RSI Settings For Intraday Chart
Hopefully, the above article gives a clear overview of the RSI settings for intraday charts in forex trading. We also discussed intraday trading and RSI, the best RSI settings for intraday chart trading, and Stochastic and RSI combining settings for intraday charts. RSI indicator is one of the most popular indicators in the forex market.
Once understood and correctly applied using the RSI settings for intraday chart trading, Forex traders will help develop the ability to indicate whether prices are trending when a forex market is oversold or overbought and the best timeframe or price chart to enter or exit a trade. So, look at the above article to find the best RSI settings for intraday charts in forex trading.
