Hi, this is María and this time I want to talk about the settings of the RSI. Hope it will help you trade better.

The default setting used by most traders for the RSI is 14. That means that the indicator will go back 14 periods or time frames based on the chart being used (14 days on a Daily chart, 14 hours on an hourly chart and so forth) and make its calculation based on that.

Personally, I believe that particular setting would suffice in the majority of trading scenarios. For longer term trading the number might be increased but, fewer trading signals will be generated but they will have a greater level of reliability associated with them...the same as using a longer term chart versus a shorter term chart for example.

Conversely, if you lessen the number of periods in the equation, more trading signals will be generated but they will have a lower level of reliability...just like using a shorter time frame chart lowers the reliability of the signals it provides.

After all of the above is said, a trader can set the period to whatever they find best serves their trading style and strategy. This can be accomplished through experimention with various time frames and logging the results. However, the 14 period gets my vote for the trading style employed by the majority of traders.

As always have a great day and make lots of pips.

Best regards,

María
http://www.fx-megaforex.com/
Smart Solutions to your trading problems.

Make better decisions, trade better, make lots of money.