Jump to content

Indicator update: Customising RSI levels


On the back of client feedback we now offer the possibility to customise the RSI levels on desktop and mobile devices. To do so, click on the RSI label once you have enable the indicator on your chart. This will open a dialog box that will allow you to change the levels (which are set at the default levels of 30/70), as well as customise the period and the colour of the lines.

What is RSI?

The Relative Strength Index is a momentum indicator that measures the magnitude of recent price changes to evaluate whether a stock is oversold or overbought. This indicator can oscillate between 0 and 100 and usually uses the level of 30 to indicate that a stock is oversold and the level of 70 to indicate that a stock is overbought.

2018-12-18 14_30_35-IG Trading Platform _ Spread Betting.pngThe RSI indicator uses the average percentage gains and losses of a specific period which is usually the last 14 days. When a candle closes after a positive move (a green candle stick) the RSI value will increase, whilst after a negative move (a red candle stick) it will fall as the number. The RSI value will be 0 if stocks fall on all 14 days and 100 if the price moves up on all the days.

Like the price, the RSI creates highs and lows that can be connected to create resistance and support levels. In the same way as price action, these support and resistance levels can also be tested, broken and retested.

How RSI is used as a forward-looking indicator

These support and resistance levels can be broken on the RSI chart before they are broken on the price chart, which can create an opportunity to profit on a reversal before it takes place on the price. As with all indicators this is never a guarantee, however it does provide a qualitative supportive argument for possible price action.

Let’s look at the Eurodollar 1-hour chart as an example of this resistance break:


We can see that both the price and the RSI are testing a resistance level, but the breakthrough happens one candlestick before on the RSI chart than it does in the price chart. In this case, the RSI is a leading signal that offers possibility to enter the market at a more favourable price an hour before the actual price level breaks through the resistance level.

Why would you adjust the RSI levels?

For the RSI to be most effective, it has to be adjusted for the inherent volatility of a specific stock or market. In a very volatile environment the RSI is likely to hit the overbought and oversold levels with more frequency, weakening the reliability of the RSI as a leading indicator. When you widen the resistance and support levels you will probably have fewer trends, but they will possibly be better signals.

As can be seen on the FTSE100 15-minute graphs below, the RSI tests the 30-support level various times, but it is not until it tests the 20-support level that the price trends actually reverses.





Recommended Comments

It would be great if

1. the results such as MACD are shown;

2. users are allowed to customize those indicators by themselfs.

Share this comment

Link to comment

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

You are posting as a guest. If you have an account, please sign in.
Add a comment...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Blog Statistics

    • Total Blogs
    • Total Entries
  • Our picks

    • APAC brief - 21 Mar
      Market action proves it again: this market hinges on the Fed: The US Fed has proven itself as the most important game in town for traders. The FOMC met this morning, and lo-and-behold: the dovish Fed has proven more dovish than previously thought; the patient Fed has proven more patient that previously thought. Interest rates have remained on hold, but everyone knew that was to be the case today. It was about the dot-plots, the neutral-rate, the economic projections, and the balance sheet run-off. On all accounts, the Fed has downgraded their views on the outlook. And boy, have markets responded. The S&P500 has proven its major-sensitivity to FOMC policy and whipsawed alongside a fall in US Treasury yields, as traders price-in rate cuts from the Fed in the future.

      The US Dollar sends some asset classes into a tizz: The US Dollar has tumbled across the board consequently, pushing gold prices higher. The Australian Dollar, even for all its current unattractiveness, has burst higher, to be trading back toward the 0.7150 mark. Commodity prices, especially those of thriving industrial metals, have also rallied courtesy of the weaker greenback. Emerging market currencies are collectively stronger, too. This is all coming because traders are more-or-less betting that the Fed is at the end of its hiking cycle, and financial conditions will not be constricted by policy-maker intervention. Relatively cheap money will continue to flow, as yields remain depressed, and allow for the (sometimes wonton) risk-taking conditions that markets have grown used to in the past decade.
        • Great!
        • Like
      • 0 replies
    • APAC brief 20 Mar
      Another trade-war headline downs sentiment: There’s some news floating through the wires that sentiment has taken a hit overnight courtesy of some unfavourable trade-war headlines. It’s been reported that Chinese officials aren’t co-operating with their US counterparts, as it applies to certain sensitive elements of trade-negotiations. The S&P500, which had been developing some intraday momentum prior to the release, has retraced throughout trade, consequent to the news. It’s closed flat for the day, but despite this fall, moves in rates and bond markets suggest the fundamentals currently remain the same. The all-important balance between financial conditions and growth expectations is still there, ultimately supporting the bullishly inclined, as markets now prepare for tomorrow morning’s meeting of the US Federal Reserve.

      The unresolvable issues: It’s perhaps an assumption alone, but the (very vague) report leaked to the market about trade negotiations surely pertains to one of the well-understood, seemingly intractable issues embroiling the US and China. Those, at its core, unrelated to economics, but to strategic, and somewhat philosophical differences. These are intellectual property theft, currency manipulation, and Chinese military posturing in the Asian region – especially the South China Sea. These differences are relevant because they boil down to brutal power-politics, and an essential clash of ideologies. This isn’t to suggest a trade-deal, and future bilateral cooperation can’t exist between both parties; but that whatever deal is struck, it’s unlikely to put an end to geopolitical tensions.
      • 0 replies
    • Debenhams / Mike Ashley
      Join the discussion: "It seems likely to me that what will actually happen here is that Mike Ashley will bid, because aside from anything else, the House of Fraser is not of critical size without combining with Debenhams and is losing money heavily.

      As Mr Ashley does not have access to enough luxury brands, so he is having to fill the House of Fraser stores with Sports Direct stock which is badly weakening the House of Fraser brand. He needs to combine Debenhams with the House of Fraser fairly urgently I would say, especially now that Debenhams has signed off the Li + Fung deal which promises a pipeline of decent quality items into its stores."
        • Like
      • 3 replies
  • Latest Forum Topics