The RSI Filter Indicator is a trend-following forex/stock scalping and intraday trading companion for MT4 users. It represents an unorthodox way of using the Relative Strength Index (RSI) for identifying accurate trend directions.
RSI is commonly used to identify the market’s overbought/oversold condition. In contrast, the RSI Filter straightly delivers trend signals and examines the signal validity itself.
The RSI Filter Indicator plots a signal line alongside the curvilinear line showing the Relative Strength value. It determines the trend signals based on how the indicator level interacts with the filter line.
The RSI value exceeding the signal filter line indicates a bullish market trend. In such conditions, If you notice the price swings higher, remaining under an overall uptrend, it is time to enter long.
In contrast, RSI dropping below the signal filter level hints at a bearish market trend. Once you receive a downtrend confirmation, look for a price pullback to enter short.
Before you consider a buy or sell exit, it is ideal to wait for an opposite trend signal to your entry. For instance, the RSI moves below the signal line while you’re on long means it’s time for a buy-exit.
Technically, the RSI Filter indicator works on MTF charts. So may look up intraday opportunities simultaneously while scalping in live markets. Moreover, you can apply the RSI trend signal for both forex and stock trading.
RSI Filter Indicator: Buy Conditions
- RSI level is on a rising trend
- The RSI value exceeds the signal line
- SL below the recent swing low of the price
- Exit long when the RSI level drops below the signal line
- RSI level starts moving within a downtrend
- The RSI value drops below the signal line
- Place SL above the current market’s swing high
- Exit sell once the RSI exceeds the signal line