Relative Strength Oscillator is an alternative version of a well-known indicator Relative Strength Index (RSI). This indicator is able to closely monitor the past price action data and transform them into overbought/oversold signals. It can also be added as a momentum filter to other trend-following strategies.
Relative Strength Oscillator is quite flexible in its application because it can be applied to trade on all sorts of timeframe charts within the MT4 trading platform. Moreover, it supports trading all kinds of forex currency pairs in the financial markets.
Relative Strength Oscillator Overview
Download the Relative Strength Oscillator and install it on your MT4 terminal. Once you’re done, your chart will transform like the following image:
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Relative Strength Oscillator Explanation
Relative Strength Oscillator (RSO) has been built based on a 14-day median average system. Its basic task is to generate alert signals when the market reaches its overbought or oversold conditions.
Its value hits at its 20-level means the market is in an overbought condition. On the other hand, RSO value at -20-level represents the oversold condition of the market. The indicator value at zero signals for a neutral or no-trend.
As a trader, your job is to sell from the overbought condition and buy from the oversold condition. For better confirmation, you may add other trend-following indicators along with this sophisticated forex trading indicator.
Relative Strength: Buy Conditions
- RSO value drops up to -20 level
- Price candle closes as a bullish bar
- Enter long at the break of the respective bullish bar’s high
- Set stop loss below the signaling candle’s low
- Exit long/take profit whenever RSO value hits its 20-level
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Relative Strength: Sell Conditions
- RSO value rises up to 20 level
- Price candle closes as a bearish bar
- Enter short at the break of the respective bearish bar’s low
- Set stop loss above the signaling candle’s high
- Exit short/take profit whenever RSO value hits its -20-level