Moreover, most of the traders evaluate this strategy on their own, without any prior research or consultation. The reason behind the popularity of such a strategy is mere common sense. RSI is an integral indicator of momentum, with the help of which traders evaluate the level of current gains to losses.
This efficient comparison between the recent gains to losses can further assess when an asset is either overbought or oversold. Going by the RSI index, when RSI falls below 30, that particular asset in discussion is thought to be oversold, and vice vers.
That is a reason to believe that a reversal could occure, not a signal however! In order to derive trading signals, it plots them on the same chart and makes use of the 9 day MACD of the respective asset. Now, when the MACD goes beyond its 9 day moving average, it indicates a better time for buying and when it goes further below, it indicates selling time.
The market conditions are extremely volatile and there is no hard and fast rule as to suggest in what ways the indicators will derive the accurate results. A plotted chart can anytime give different result than that of a real market situation. So, you should always keep in mind that there is not a single Holy Grail, atleast not in the trading market.
Anytime, the market can turn a complete U-turn and you can find yourself under tremendous loss. Furthermore, with so much volatility and price adjustments, false assumptions may also be generated. The most integral problem here is that reliable trade opportunities, in which all the indicators reveal the same results are very hard to find and almost impossible.
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