20 Aug 2015

How to Read the Multi RSI Indicator

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EURUSDH1 til indicators

Trading Indicator Lab’s Multi RSI can help you easily spot trading opportunities in potential trend reversals across the 28 currency pairs in one glance. You can do this by observing the following properties of the indicator:

Order

As you may already know, the indicator basically computes for the most current RSI signal of each currency pair which is then displayed as a two-column list sorted from highest to lowest. The currencies found at the left hand side of the list are closer to the overbought level (70 by default) while the currency pairs found at the right hand side of the list are closer to the oversold level (30 by default).

Color

You can tell instantly which currency pairs are oversold, overbought, or at the verge of either both just by looking at the color of each currency pair.

  • Bright Red – A currency pair is this color when its RSI is EQUAL to or GREATER than the overbought level (70). This is a bearish signal which means that the currency pair’s price is about to drop. You can find these at the top left corner of the list.
  • Dark Red – A currency pair is this color when its RSI is NEAR the overbought level. This means that you may have to watch out for this currency pair as it has potential to become overbought. You can find these at the top left corner of the list just below the Bright Red ones.
  • White – A currency pair is this color when it is nowhere near overbought or oversold levels. You can find these at the middle part of the list.
  • Bright Green – A currency pair is this color when its RSI is EQUAL to or LESS than the oversold level (30). This is a bullish signal which means that the currency pair’s price is about to rise. You can find these at the bottom right corner of the list.
  • Dark Green – A currency pair is this color when its RSI is NEAR the oversold level. This means that you may have to watch out for this currency pair as it has potential to become oversold. You can find these at the bottom right corner of the list just above the Bright Green ones.

Text

Trading Indicator Lab’s Multi RSI indicator not only displays the most current RSI signal of each of the currency pairs, but it also shows you its DIRECTION and MAGNITUDE just by looking at the value indicated in the parenthesis. Each currency pair listed are written in the following notation:

<symbol>: <RSI signal> (+/-<orientation>)

Where:

  • <symbol> – This is the symbol of the currency pair.
  • <RSI signal> – This is the most current RSI signal of the corresponding currency pair.
  • +/-<orientation> – This tells you the direction and the magnitude of the corresponding currency pair’s RSI signal. It answers the question, “Is it pointing up or down?”
    • Orientation – This is the amount of change that had taken place since the last bar’s RSI signal relative to the most current one.
    • Positive orientation (+) – If the orientation is positive, it means that the last bar’s RSI signal is less than the current one. In other words, the currency pair’s RSI is going UPWARDS.
    • Negative orientation (-) – If the orientation is negative, it means that the last bar’s RSI is greater than the current one. In other words, the currency pair’s RSI is going DOWNWARDS.

This is A LOT simpler than you might think.

Examples

Let us use the following screenshot of the Multi RSI as an example:

EURUSD,H1 with Multi RSI
EURUSD,H1 with Multi RSI

Example 1

List item #1: (left, top most)

example1

EURUSD: 70.63 (+0.73)

Keeping in mind the notation, we can easily read the example above:

  • The currency pair is EURUSD.
  • The current RSI signal of EURUSD is 70.63. (Because it is greater than the overbought level of 70, it is bright red.)
  • The RSI of EURUSD is going upwards because according to its orientation, its RSI rose (positive) by +0.73 points.

In other words: EURUSD has breached the overbought level (70) and its RSI is continuing to rise for the last hour.

Example 2

List item #2: (left, 2nd to the top)

example2

EURGBP: 68.48 (+1.41)

Again, remembering the notation we can say that:

  • The currency pair is EURGBP.
  • The current RSI signal of EURGBP is 68.48. (Because it is near the overbought level of 70, it is dark red.)
  • The RSI of EURGBP is going upwards because according to its orientation, its RSI rose (positive) by +1.41 points.

You can also say that EURGBP is potentially entering the overbought state as further evidenced by its direction which is upward towards the overbought threshold.

Example 3

List item #26: (right 3rd to the bottom)

example3

GBPCHF: 32.39 (-4.27)

Using the notation we can tell that:

  • The currency pair is GBPCHF.
  • The current RSI signal of GBPCHF is 32.39. (Because it is near the oversold level of 30, it is dark green.)
  • The RSI of GBPCHF is going downwards because according to its orientation, its RSI dropped (negative) by -4.27 points.

You can also say that GBPCHF is potentially entering the oversold state as further evidenced by its direction which is downward towards the oversold threshold.

Example 4

Lite item #28: (right, bottom most)

example4

USDJPY: 26.24 (-3.17)

Keeping in mind again the notation:

  • The currency pair is USDJPY.
  • The current RSI signal of USDJPY is 26.24. (Because it is greater than the overbought level of 30, it is bright green.)
  • The RSI of USDJPY is going downwards because according to its orientation, its RSI dropped (negative) by -3.17 points.

In other words: USDJPY has breached the overbought level (70) and its RSI is continuing to drop for the last hour.

Are you getting a hang of it? It is easy. Using this powerful tool you can easily see exactly the direction of the foreign exchange market through the 28 major currency pairs. You can get the Multi RSI indicator here.

Happy trading! 🙂