Divergence is a great way to find price reversals using RSI forex indicator. This reliable trading signal can be found on any timeframe and any currency pair. For best results look for trendline breakout coupled with divergence.
Used forex indicators
RSI (relative strength index) 14
Timeframe
Any above 5 minutes
Any currency pair
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Forex strategy rules
SELL
Price reached new high, while RSI rose above 70 line. Minor swing down created new low within upward price movement. RSI falls below 70 line.
Price rallies again surpassing previous high and creating a new one. RSI again surpasses the 70 line, but failed to rise above previous high. 1
By connecting two price highs and two RSI highs we can clearly see a divergence being present in the market.
We enter the trade short, on closed bearish candle, once the RSI falls below 70.
Protective stop loss is placed above the high of formation.
Take profit equals the distance between our entry and take profit.
BUY
Price reached new low, while RSI falls below 30 line. Minor swing up created new high within downward price movement. RSI rises above 30 line.
Price falls again surpassing previous low and creating a new one. RSI again surpasses the 30 line, but failed to fall below previous low.
By connecting two price lows and two RSI lows we can clearly see a divergence being present in the market.
We enter the trade long, on closed bullish candle, once the RSI rises above 30
Protective stop loss is placed under the low of formation.
Take profit equals the distance between our entry and take profit.
