Индекс На Форекс

The relative strength index (RSI) is most commonly used to indicate temporarily overbought or oversold conditions in a market. An intraday forex trading strategy can be devised to take advantage of indications from the RSI that a market is overextended and therefore likely to retrace.

Understanding the RSI

The RSI is a widely used technical indicator and an oscillator that indicates a market is overbought when the RSI value is over 70 and indicates oversold conditions when RSI readings are under Some traders and analysts prefer to use the more extreme readings of 80 and

A weakness of the RSI is that sudden, sharp price movements can cause it to spike repeatedly up or down, and, thus, it is prone to giving false signals. However, if those spikes or falls show a trading confirmation when compared with other signals, it could signal an entry or exit point.

It is not uncommon for the price to continue to extend well beyond the point where the RSI first indicates the market as being overbought or oversold. For this reason, a trading strategy using the RSI works best when supplemented with other technical indicators to avoid entering a trade too early.

Identifying Trading Setups Using the RSI

Here are some steps to implementing an intraday forex trading strategy that employs the RSI and at least one additional confirming indicator:

1. Monitor the RSI for readings indicating the market is overbought or oversold.
2. Consult other momentum or trend indicators for confirming signs of an impending retracement. For example, if the RSI shows oversold readings, a retracement to the upside is anticipated though not necessarily confirmed.

It is considered good practice to look at initiating a trade looking to profit from a retracement if one of these additional conditions are met:

1. The moving average convergence divergence (MACD) has shown divergence from price (for example, if the price has made a new low, but the MACD has not and has turned from a downslope to an upslope).
2. The average directional index (ADX) has turned in the direction of a possible retracement.

If the above conditions are met, then consider initiating the trade with a stop-loss order just beyond the recent low or high price, depending on whether the trade is a buy trade or sell trade, respectively. The initial profit target can be the nearest identified support/resistance level.

The Bottom Line

The RSI helps traders understand when a market is overbought or oversold so that they can expect either momentum or a pullback in prices.

If the RSI, along with other indicators, is set up and read correctly, it can help technical traders determine their trading strategies, such as entry and exit points, buying or holding, or shorting positions. RSI can be used in a variety of markets, including stocks and forex.

How do you know when a market is overbought or oversold? One indicator that can help you to visualize these conditions on your Forex charts is the Money Flow Index, often just called MFI for short.

This guide will teach you how to plot this indicator on your charts, how to interpret it, and how you can put it to good use while you trade.

What is the Money Flow Index?

The Money Flow Index is a type of oscillator designed by Gene Quong and Avram Soudack. It is weighted by volume.

Money Flow Index formula

To get money flow index manually, follow these steps:

1. Calculate the typical price by averaging together the high, low, and closing price:

1. Multiply the typical price by volume to get the money flow:

Compute the positive money flow and the negative money flow separately.

If the typical price on a given day is higher than it was the day before, it is a positive money flow day. Add together the money flow for all such days to compute positive money flow.

If the typical price on a given day is lower than it was the day before, it is a negative money flow day. Add together the money flow for all such days to compute negative money flow.

There may be days where there is no typical price change compared to the previous day. You can ignore those days in your positive and negative money flow calculations.

1. Compute the money ratio by dividing positive money flow by negative money flow:

1. Calculate the money flow index using the following formula:

The math above may seem like a lot of work, but when you use trading software like MT4, you will not need to worry about doing these calculations by hand. The trading platform will take care of all of the math for you.

How to read Money Flow Index?

When you plot it on your chart, you will see a line oscillating between 0 and , with additional horizontal lines drawn at 20 and In terms of its appearance, it is quite close to the Relative Strength Index (RSI), a similar oscillator.

What does the Money Flow Index show us?

The name “money flow index” describes quite well what it is the MFI is showing us. For the asset that you are looking at, you can see how money is flowing in and out.

The main utility of monitoring money flow in this fashion is that you can get a feel for whether the market may be overbought or oversold.

Sometimes, you can also spot reversals based on divergence.

How to add the Money Flow Index to your charts?

1. Attach the indicator to your chart. Where you will find it depends on your charting platform. In MT4, it is under Insert->Indicators->Volume.
2. Go with the defaults, or choose custom settings for the period, volumes, and levels.
3. Now you can use the indicator. It will appear on the bottom of your chart.

How to use the Money Flow Index in trading?

There are a few ways you can make use of the Money Flow Index in your trading strategy:

• Look for overbought and oversold conditions. When you see the oscillator pass above 80, that may mean the market is overbought. When you see it dip below 20, that may mean it is oversold. Some traders prefer to use 10 and 90, though this will give you fewer signals.
• If the MFI is trading within the 20 and 80 bounds, keep an eye on whether it is above or below When it crosses above 50, buying pressure exists. Selling pressure exists when it drops under
• When you see the oscillator drop below 20, that may mean that it is time to buy. When it is above 80, it could be time to sell.
• Look for divergences. Sometimes you will see the indicator and price going in two different directions. As an example, say that the asset’s price is rising. But you see the oscillator dropping. In such a situation, there is a reduction in buying pressure. It could be time to sell. The reverse can happen as well.
• Having a hard time knowing when a retracement is complete? During a retracement, you will sometimes notice the oscillator fleetingly crossing above 80 or under 20, and then returning. Once it returns, the retracement is likely done and you can enter the trade.

General tips for using the Money Flow Index

• Simply plotting the MFI on your chart is not in and of itself a trading system. While the MFI can give you some perspective on what is going on in the market, by itself, it will not give you all the information you need to identify solid setups. So, you should use it along with other indicators to get a comprehensive picture of the market. You could, for example, use it to confirm what other indicators are telling you.
• Before you put the MFI to use, you need to backtest and demo test your trading strategy. Only go live once you see that your method has the potential to generate profit.
• Which is better — the MFI or the RSI? That depends on who you ask. The momentum-based RSI is the one that more traders are familiar with. But you can get just as good of results with the MFI, depending on your strategy. Indeed, there are even Forex traders who use both of these indicators on their charts at the same time. You will need to figure out what works best for you based on your tests.

Conclusion

The MFI can lend valuable context to your trading method, but isn't a trading method on its own. If you have been looking for a tool to add overbought and oversold context to your charts, help you spot potential reversals, and assist you in making sense of retracements, the Money Flow Index may be just what you are seeking.

Try adding the MFI to your chart. Train yourself to look for divergence, and watch the 20, 80, and 50 lines to keep track of buying and selling pressure. Incorporated into a reliable trading method, this oscillator can help you to get in on reversals quickly and maximize your profit potentials.

If you have any questions about the Money Flow Index indicator or if you just want to discuss its use in trading with others, you can proceed to our Forex forum.

If you want to get news of the most recent updates to our guides or anything else related to Forex trading, you can subscribe to our monthly newsletter.

Currency index measures changes in the value of the currency by tracking the exchange rates of five of the most liquid currencies (USD, EUR, GBP, JPY, CHF). The value of index is composed on an equally-weighted basket method which allocates the currency against its major counterparts over a selected period of time.

Such a methodology is optimal for understanding the strength or weakness of global Forex currencies. As many global currencies are used as a reserve or safe haven currency, the index tool allows you to assess the overall efficiency of your money savings. The end value of the index reflects the average return that is gained or lost if your currency portfolio consists of one single currency. By using the currency index tool, you can easily anaylze and evaluate yearly, quarterly, monthly, weekly trends on the currency market.

The currency index includes the following input parameters:

• Start Date represents a beginning date from which calculations are to be started.
• Base Date represents a basic date which is used as equivalent for comparison. The value of index at the base date is always equal to %.
• Number of days is a number of days which are shown on the chart from a start date.

How to use: select start date, base date and days amount to proceed to calculations.

Example: start date , base date , days amount

Interpretation: As is apparent from the chart above, the Japanese yen was the strongest currency in year and gained on average 30 per cent against its major counterparties. The US dollar was also one of the strongest currencies. Despite losing 10 per cent of its value by March, it recovered by August and appreciated by 10 per cent on year-to-date basis. The Swiss franc was the most stable currency and its value didn't change much over the year. The Euro and Pound lost their ground in , weakening by 10 and 20 percent respectively.