Traders have the option to change inputs or use the default settings. After the indicator has been selected, a RSIwindow will automatically appear. The window will have three tabs:

  1. Parameters

  2. Levels

  3. Visualization
The Parameters tab, shown in Figure 5, has several user-defined input options:

  • Period: The lookback period, or the number of bars that will be used in the calculation. By default, this is set to 14 as this is the most commonly used setting.

  • Apply to: The price data that will be used in the calculation. By default, this is set to Close.

  • Style: The color, line style and line weight of the indicator.

  • Fixed Minimum and Fixed Maximum: To set the range of the indicator. By default, these are set a minimum of zero and a maximum of 100.
Figure 5: Traders can define the Period and other inputs in the Parameters tab.

The Levels tab, shown in Figure 6, allows traders to create horizontal threshold lines that are drawn on top of the RSI indicator. These lines are used to help traders identify overbought and oversold conditions. The RSI indicator is drawn within a default range of zero to 100. A common setting for the horizontal lines is to use 70 as the upper threshold, and 30 for the lower threshold.

Figure 6: Traders can apply upper and lower thresholds in the Levels tab.

When the RSI crosses above the upper threshold, it indicates overbought conditions; when it dips below the lower threshold, it signifies oversold conditions. While there are multiple ways to interpret the RSI indicator, many traders look for trend reversals once the RSI crosses above the upper threshold or below the lower threshold. Figure 7 shows an example of the upper threshold providing a good signal for a trend change. As the RSI moves above 70, signaling overbought conditions, the price begins to fall.

Figure 7: A RSI above 70 can signal a trend reversal. Here, on the four hour EUR/USD chart, the price begins to plummet as soon as the RSI breaches the upper threshold.

To change where the upper and lower threshold are drawn on the RSI, double-click each value under "Level" and enter the desired levels. These values can be set anywhere between zero and 100. Traders can enter names for the threshold, if desired, in the "Description" field. These names will now appear on the horizontal lines, as shown in Figure 8.

Figure 8: Names entered in the "Description" field will appear on each threshold line. Here, the lines have been named "Overbought" (upper threshold) and "Oversold" (lower threshold).

In the Visualization tab, shown in Figure 9, traders can select to which timeframes the indicator will be attached, along with its current settings. In the Figure, "All timeframes" has been selected, indicating that the RSI will appear in every chart as traders toggle between timeframes. To limit the timeframes on which the RSI will appear, check the desired chart timeframes. If a timeframe is left unchecked, the RSI will not appear on that chart timeframe.

Figure 9: Traders can specify to which timeframes the RSI will be attached by making selections in the Visualization tab.

SEE: Exploring Oscillators and Indicators: RSI

Modifying RSI
Pressing CTRL + I on the keyboard will open a window that lists all of the indicators on the active chart, as shown in Figure 10. To change the inputs for the RSI (or any other indicator), highlight "Relative Strength Index" and click "Edit." This action will open the same window that was used to identify the original inputs, including the tabs for Parameters, Levels and Visualization. Make any desired changes and click "OK" to close the window. The new inputs will now be reflected in the RSI.

Figure 10: Press CTRL + I on the keyboard to open the RSI window and make changes to the inputs.

Deleting RSI
To delete RSI from a price chart:

  • Press CTRL + I on the keyboard, highlight "Relative Strength Index" and click "Delete;" or

  • Right-click the indicator within the price chart and select "Delete Indicator," as shown in Figure 11. The RSI will be removed without a prompt or any other further action.
Figure 11: To remove the RSI, right-click the indicator within the price chart and select "Delete Indicator."

Next: How To Apply Relative Strength Index With MetaTrader 4: Conclusion »

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