In this live Forex trading example I use the Relative Strength Index a.k.a. RSI indicator to discover a trading signal. The video shows how to trade a bearish divergence RSI signal in a combination with price action.
Signals of the Bearish Divergence RSI Trade
- The general price action is increasing, while the RSI indicator line is in a general down run.
- This creates a bearish divergence RSI signal between the price action and the Relative Strength Index.
- The divergence comes after the RSI line has exited the overbought area.
- Meanwhile, the price has confirmed descending tops and bottoms chart pattern.
- I shorted the USD/JPY when I saw hesitation at the upper level of the orange bearish channel.
Stop Loss and Target of the RSI Indicator Trade
I placed a Stop Loss order above the orange bearish channel. At the same time, I contained the last two tops on the chart.
I didn’t use a Take Profit order in this case, because I didn’t have a clear target on the chart. I was planning to stay in the trade until I see opposite signals coming from the RSI or the price action. This is why I carefully observed my trade.
Live Trading Example
I got back 30 minutes later to show why I close the trade. There were two major reason for my exit in this trade.
- The RSI indicator line has entered the oversold zone, which instantly creates a bullish signal on the chart.
- At the same time, the price action has been interacting with the lower level of the orange bearish channel.
These two signals made me think that the price might change directions attempting a hike to the upper level of the orange bearish channel. Bottom line, I created profit of 0.1% for about 35 minutes which I believe is a wonderful result.
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- Bearish Divergence
- Forex indicators
- Relative Strength Index
- RSI Indicator
- Technical Analysis