I was going through this website that contained some details about RSI. The writer said that RSI is not that reliable and should be used in conjunction with other indicators.
http://the-forex-trading.blogspot.com
Take a look. Are you convinced with this?
Aditi
Trading indicators are best used along with money management and good risk control, using trading indicators alone will not enable you to be a successful trader, the market is just too random and unless risk is controlled over time your account will slowly get wiped out, regardless how good a “trader” you think you are.
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The RSI (Relative Strength Indicator) is an a momentum indicator. No indicator should be used as a stand alone because the majority of indicators are lagging indicators.
The previous poster is correct in that fundamentals will clue you in as to what the investment should do in the future, how do you use fundamental analysis to time your entry? That’s why you need technical indicators.
You use fundamentals to guage what the investment is likely to do and you use technicals to time your entry/exits.
Use multiple indictors. Say you are using RSI, MACD, Stocashtics, ADX, etc. If several of them are giving you an entry signal, that there is a great chance you’ll make money. For example, if I tell you Jane likes you. I could be wrong. But if Mike, Bill, Amy, John, Susan, Tim and Kim along with myself says that Jane likes you, the probability of that being true is extremely high. If multiple indicators are giving you a buy or sell signal, the probablility of the trade working out to be a winner just shot up. It’s not guaranteed, but the probability is greater.
RSI is a technical indicator and should be take with a grain of salt, just like any technical indicator. Technical indicators sometimes work and sometimes are dead wrong. What is going to drive the long term value of any asset are its fundamentals.