What Is RSI (Relative Strength Index)?

In Forex (foreign exchange), RSI stands for relative strength index. But what exactly is RSI? RSI is a measurement of whether the market is overbought or oversold. This particular index is a gauge of extremes. While a high RSI shows that the market is overbought, a low RSI presents an oversold market. Because the RSI stretches from one extreme to another, it is considered a wide oscillator. Aside from swinging from one extreme to the other, it can show any divergence in data. If the swing is not as uniform, there is a sign of divergence. Therefore, RSI is also used by traders to observe and study patterns by which they can make their trading decisions.

The point system of RSI
In RSI, you get indices from 0 to 100. If the market is overbought, the numbers range from 70 to 100. On the other hand, if the market is oversold, numbers range from 0 to 30. Rapid RSI changes or lingering on oversold or overbought positions can serve as significant patterns that traders can look at.

The importance of RSI
RSI is important in gauging the foreign exchange market as this provides patterns that traders can rely upon when making buy, sell, or hold decisions. Though the RSI seems to be nothing more than a number, it is a great indicator of the status of the market especially if the numbers are falling within a certain range. When the numbers are within a particular range, RSI is much more accurate. RSI, however, can provide less than accurate results when the market is following a particular trend – in short, trending. Even with the possibility of inaccurate results, RSI remains one of the most trusted generators of foreign exchange market patterns. Traders can easily spot an extreme status or a divergence.

Forex News: JPY continues its slide

Forex News: JPY continues its slide

How to Really Know What Are the Best Moments to Exit a Position

In the world of foreign exchange, you must take risks. But how much risk can you handle? This is where you have to work with forex positions.
What are forex positions?
Forex positions are net total holdings of a currency. Just like the common meaning of position, a forex position is the place where you are exactly. So, when you are having terrible forex positions, it is time to let go or wait it out depending on your sense of trading adventure.
The different types of forex positions
To better know when you should exit a position, it is best to be familiar with the different forex positions first. Here are the types of forex positions:
• Short position: more currency sold than bought
• Long position: more currency bought than sold
• Flat or square position: no market exposure
• Open position: trader has bought or sold but has not closed the position yet by selling or buying back
You could say that forex positions mark your chosen strategy. If you maintain forex positions for a long time, you are more likely content with your trading results.
Forex positions and exit strategies
When do you exit forex positions effectively? There are many strategies that can be done to exit forex positions. You have to pick one that's best for you. An initial stop is ideal to save you from further losses. This gets you out of forex positions that may get you in trouble if you linger. However, some may say that getting out too early from forex positions can also prevent you from earning as much as you can. If you want to make sure you get the profit that you are hoping for, you could perform a take profit stop where you exit when you have achieved a particular number of pips you are aiming for. Exit strategies, as you can see, are strongly dependent on forex positions.

What is a Carry Trade?

The carry trade is an investment strategy which requires simultaneously borrowing short term funds and buying long term ones.


Carry trade can take several forms, from foreign exchange (Forex) strategies to credit card-related tactics.


Examples of carry trade


To use the carry trade strategy, you can borrow money through your credit card and invest it in a savings account.


Of course, the credit card should either have an interest rate of zero percent, or at least a really low interest rate during the time of borrowing. This is important so that the investment in the savings account will still be higher than the amount to be repaid.


Carry trade is sort of a nicer name for what other people refer to as stoozing. You may also make use of the carry trade strategy by borrowing low-yielding currencies while lending high-yielding currencies at the same time.


Pros and cons of carry trade

In reality, carry trade is more than just stoozing. The investment goes to investments that are much less secure than a savings account.

Though carry trade can produce high returns with smaller investments, that would all depend on luck and a lot of skill and knowledge in investing.


There is the danger of the two currencies involved in the investment changing status. So, though carry trade can produce steady returns, it can also cause great losses.