The RSI Indicator is one of the WORST Forex Indicators You Could Possibly Use.
Here's, an actual photo of the RSI, indicator, that. Bucket needs to be a little bigger though. And. Here. We are at, the RSI, video. Not. Too long ago I made the ATR, video which is the single best indicator, you, can possibly, use make, sure you see that video if you haven't you're going to want to but. I also. Before. That made. A video called the, Dirty Dozen and we're. Gonna look at that in just a moment and this is the first, item. On that Dirty Dozen list and I'm gonna go over because indicators. Wise at least it is the absolute. Worst so. In this video I'm. Going to show you why, the, RSI, is a terrible. Option, for your Forex charts now. I understand. There are a few different types of people watching this either you are already, a fan of no-nonsense. Forex, and you've seen the Dirty Dozen video and you understand, why I do what I do and you. Are probably. Never ever going to use the RSI, there. Are some of you who are just starting out trading for the first time and don't know what to use and are looking for a direction and videos. Like this are tailor-made just for you and there. Are some of you who are using the RSI, right now and actually like it you. Guys are the ones that I need to talk to the most watch. This entire video and at, the end of it if you are still on board with the RSI I cannot stop you at, the end of the day it is your money but. For the rest of you - there's. A lot of good knowledge in this video and I'm gonna go to my own charts towards, the end don't fast forward all. The way to the end because it's not gonna make a whole lot of sense if you do but. I'm gonna cover quite a bit here so if you are new, to the channel and you have not seen the Dirty Dozen of it a video here is the list these, are twelve of the top tools that I can guarantee you if you're actively trading Forex right now and you have not seen one of my videos before that, you are using at least one, of these and, in. That video which I will link below so you can see it later I gave. A little 30. Second. To 45 second blurb on, every one of these showing. People how. Faulty. And outdated. And ridiculous. These tools are, and I also said in that video that I would go back and make an individual. Video on every single one of these and it. Is the RSIs, turn, and I, wanted to start here because out, of pure indicators, in terms of, Google searches that, these get. Googling. RSI, or relative strength index will. Yield you more Google searches than anything, else, on this entire list when, it comes to pure indicators, and I want to kind of keep the indicators, trained going here so if you didn't see the Dirty Dozen video already, here is what I said about, the RSI, so, first off it was created in 1978. Spot. Forex, trading as you and I know it wasn't even really around, until, 1996. And. This. Thing was created almost 20 years before it and is crated for stock trading which. Does, not operate in the same way Forex. Does mainly. Because in stock trading things can actually be overbought, and oversold, but. In forex that's not the case watch. My reversals, video I'll. Link that one down below to stocks. Actually have intrinsic value they. Can by. Definition be overbought, or oversold, currency. Pairs can go as high or low as they want until a government entity actually steps, in and does something about it but that can happen three, thousand, five, thousand, pips down the road so. Just by how old this thing is what, it was actually created for which was not forex and what, it is trying to do you can just stop here and many, people saw this and said ok yeah I'm not using this anymore that's all all the information, I need all the evidence I need, but. Some of you are gonna be a little bit of a tougher sell so let's go ahead and move on now. What I really want to know and the. People who use the RSI right now are the people I'm talking to why. Do you, use it I already. Know the reasons why and we're gonna go over those reasons, one. By one and I'm gonna try to dispel, them one, by one to, see if I can talk you off this ledge first. Off you, probably use it because it's very easy to use and I. Agree it is for those of you who are brand brand, new to forex trading and don't know how to use the RSI, it. Goes something like this, now there are a couple different ways to use it but the. Way almost. Everybody, who uses this indicator will, actually, use. It for is. They're. Gonna wait until this line gets. Down, into. Now. I'm using air quotes oversold. Territory. And, then. They wait until the. Line comes back up across the thirty you set your levels. At 70 and 30 when. This line gets back across the 30 that is a signal, for you to go long because. It is confirming, what they think is a reversal, and so.
Then Conversely if. The, line were to ever get up into this overbought, territory, above 70 you would wait for it to come back down and once. It does that will give you a short, entry real. Simple super, easy to use I agree but this point will come into play later all right let's keep going. Why. Else might you use it well it's extremely, popular you, see, a lot, of people on Twitter and on different web sites and even on YouTube using. The RSI, and you, figure well this many people are using it I should. Probably be using it too who doesn't want to be popular who doesn't want to follow the crowd these people seem like they know what they're doing and again. Between RSI. Indicator and, relative, strength index this, thing it's about. 25,000. Searches on Google every single month if, you didn't know any better and when, you first start out you didn't know any better you would think well this is the way to go and, now fans, have no nonsense Forex, they're already, screaming. The answer at you if you're popular, you're done. Because. You are now part of that 99%, that and. This, number is low when, I say low it's probably closer to 100%, than it is 99%. 99%. Of traders who forex. Traders who either lose. Money. Breakeven. Or never, quite, make enough money to get where they can actually distance, themselves from their regular job and start, doing this for a living which is what most people almost, everybody I've talked to that actually trades ultimately, want to do and if you are doing the things in forex, that are popular, this, is where you are going to end up. Because. Another video I've made probably the most important, video I've made up to this point the Big Bang Smitty. Big. Banks eat the popular kids they find out where the popular money is going and they. Take it they move by moving price the other way it's really, really simple if you, don't understand what I'm saying please go watch this video after, you're done I'm gonna link that one below too but.
Just Know this so many people, use the RSI, and if, it is giving so many people, a long signal for example you. Have become, a huge, blip, on the big banks radar and that is, giving them permission to take price the other way whenever they want they. Might give you a win here and there just to keep you in the game we'll talk about that in a bit too but, this is not stock trading, this is not the herd mentality the. Mechanics, of this market move the exact, opposite. You. Do not want to be popular at all and if you were doing anything that. Would make it so that would make you that way you need to change right away and things. Like that big banks, video will, explain, further because, I know when I first tell people this it's kind of hard to believe. So. Another, reason you use it is you were shown from the start this is a big one and this is I've major, problems, with Forex, education in, the way it teaches people from. The start and that's a big reason why videos, like this exist, people have said hey you should you. Should put up your own training. Course and I, don't want to do that I just, I would rather wait. For you to, go get, your training somewhere else and say ok now that you've learned this, here's, what you should actually do but, when you were first. Taught Forex from the start it was super exciting because you, learned all these little tools and indicators and I guarantee you no matter who taught you every. Example, they gave you works. Like a charm, gave. You that perfect entry, every time, which, is super. Super unrealistic, you learn that the hard way as soon as you get out there and started trading yourself, but. The RSI. Because. It is so easy to use and easy to read, told. You that with. The least amount of effort all I have to do is put this on my chart and every time it gives me a signal just take it it's, super. Easy and that, is a reason why so many people still use it and put it on their charts but. Did you ever once question, the people that were showing you how to trade you. Probably didn't, hear some dirty little secrets, about. Anybody. Who's associated, with Forex. Education at the beginner level most. Of them don't actually trade if. People. Are in the forex industry and, they are making money, by, being instructors, by being news reporters, whatever, they do most. Of them don't actually have to trade anymore believe, me if they did if they had to rely on the money they actually made by trading they wouldn't be using hardly any of the things they were going to show you because they would lose but. I'm telling you you right now could just take all the things you learned when you first learn how to trade Forex, repackage. Them and put them under your own name and put it out there and make money people. Would buy it especially. If you're good at marketing because people just don't know any better they're not gonna question your ability to trade yourself they, just want to learn and showing. Them things dumb, dumb things like the RSI, and Fibonacci and stuff like that especially. If, you should only show them examples that work well you're gonna get them on your side every time this. Is a problem. Also. Most, of these people don't even know about other indicators, they, know about what's on the Dirty Dozen and maybe two or three other, tools they can put on their chart and their, knowledge stops, there, most. Traders knowledge, stops, there there, are thousands. Of indicators. And tools, that you can put on your Forex chart at any given time. Most. People only know about fifteen. To twenty maximum. I am, blown away by this never. Once did these people stop and say you know what I just keep losing these, indicators, are terrible, maybe.
There Is another way I did, that and over. Time I had tested, thousands. Of indicators, on all different time frames on all different currency pairs to, get to the ones I use now and guess, what guys there. Are indicators, that were actually developed, by forex. Traders in, this, century, for the, purpose of forex trading which. Is the opposite, of everything, you saw on that Dirty Dozen video but, did any of these instructors ever have the gall to show it to you no because, they didn't know either they. Showed you the RSI, and that's, why you're losing and. And. I've alluded to this already the worst thing about it is and, this isn't just an education, this is everywhere, this is all over Twitter, for one and I'm, not, the type to. Talk. To people on Twitter but you really really want to when you see things like this because it just just. Irks people, like me when. You first saw the examples, they showed you you. Thought to yourself wow look. At how well this works it must work every time what. You didn't know is that, they selected. The perfect currency. Pair on the, perfect time frame at, that one perfect, moment in time where. This indicator, worked really really well and. Like that drives, me crazy, and the funniest part about when, they do it with the RSI, is if, you actually look at it on some of these examples it still. Doesn't work I'll show you this is great I don't know who did this or where this is from but. This is a clear example of, you. Being lazy and thinking this thing works when it actually doesn't so. Here's. The overbought. Side. Of things and then there's two different, times it, gives you a signal to go short and price, did eventually go short over, here two, different times you could have gone long and price eventually, went, long but. Let's look at this more closely so. Your first signal, to go short is here, alright right. Here now I'm using a mouse so I'm going to go straight, up as I can so. That signal, was on this candle right here now. The very next candle, shot. Upward. This. Candle took out a lot of people's stop. Losses and after. It closed a lot, of people probably looked at that because, that's an engulfing candle. Which. For a lot of people is a sign that price is going the other way and they. Said yeah. It's time to exit and move on now if you weren't one of those people that's fine if you would have said okay my stop-loss would have actually been up here or maybe even up here okay, I'll go, with that but for a lot, of people they exited, right after this candle and then. The. Indicator, itself, moved, back into that overbought. Territory, with, this candle right here so, now you're, a beloved indicator, is telling, you that this thing is back into overbought, territory, so. Are you going to go short at this point now, you. You've just been, given another reason, to exit, so. Let's say you, did not exit, and you're still in this tray okay. So. It goes down a little bit back to where you bought it went back up and then you finally get this down candle, here now.
If You're honestly sitting there saying well this would have hit my take profit mark. I will. Say probably not if you really are somebody who had their stop-loss, this. High your. Take profit level. Was probably, somewhere down here if not lower, so. I will call. On that and then, price. Went back up again and then, down and back up again, if. You are one of the very very, few people who were still in this trade and believe, you me if you are a sane minded, discipline, trader you, would have been out of this trade a long time ago but for some reason you're a lunatic and you stayed in it you would have actually reaped, the rewards to, a point and wrote. It on the way down so. Good, for you if that was the case I don't, like your chances going forward if that's the type of trader you are but. Just understand, that most people would have been out a long time ago, and not have made any money, from. This, move here because. Especially when. This thing was doing a whole bunch of nothing this, indicator, was going down usually when people see indicators going down and price going nowhere, that's a yet another sign to exit all, right so, we're. Gonna Kay let's, go look at the more ridiculous. Example, which is are these two Long's right here let's. Start with this one this. One gave you a long entry on this candle right here and then, what immediately, happened after, that these, two huge. Short. Candles. Nobody. Was left in this trade if. You're the type of person said, well I would have been because my stop-loss is way. Down here I don't. Believe you and if, for some reason, you are it. Will not be long until you lose all of your money if that's how you approach trading any, sane. Minded, trader, would have been long, gone even. Way before price is allowed to get this far down that was a huge loss all. Right so let's, wait for the next long entry which is this arrow right here. Oh. That, is probably, this candle, right here so. This gave you a whole lot of nothing, and then the very next day boom. This. Huge. Maura. BOSU short. Candle down. Bad. Bad, news again. Nobody. Would have been left in this long trade but, if you were being lazy and looking at it in hindsight you would have said Wow it was overbought, there and price went down it. Was oversold. Here and price went up but. If you're looking at it as an actual trader. Even. When it works it, just gave you four. Different, losses. How. About that the. RSI, is one of the few indicators out there that even when it works it doesn't work but. Look I'm not mad at you for using it you have a lot of reasons why especially, starting. Out that you would have used it you know these are, perfectly. Valid reasons. If you didn't know any better but another big reason that I have any in touch known yet is the. RSI is one of the most televised, indicators. Out there if you were somebody who watches CNBC. Or a Bloomberg, you. Will whenever, they actually make some desperate, attempt to show technical, analysis you will, see this indicator, a lot so Bloomberg, mostly does stocks but this is an example of a chart you would see with them as you, see this, weekly. RSI, below and then here is another chart. So. They, do have a habit of using it and why do they use it because it's very easy to see like we said before people. Who. Watch these shows usually, know nothing about technical, analysis, and so you need to show them the easiest. Dumbest, thing you can possibly show, them or else they're not going to understand what you're doing now Bloomberg actually has the decency to put currencies. Up every once in a while and they'll. Use the RSI too because especially when you shade in these little overbought, and oversold levels, they're a lot easier to see and understand, then. An, indicator, that actually works but. If you're the type of person that started using the RSI, and then saw, all these smart. People on TV using it too no, wonder you're, still using it now and no wonder you're still in the, back of your mind trying to argue me on these points but. Let's take a look, at. What really happens, on these shows for. One they, are not, technical.
Traders. Bloomberg. And especially CNBC. Spends, pretty much all their time on fundamental, analysis, because, that's what the people who watch those shows want, to see most. Of these people too are not even, traders again. They. Were nice suits they, have these prestigious jobs they speak really well they're. Not actual traders, more often than not and. If. They, are they're definitely not forex traders you'll see some legit stock traders on there I'm sure but actual, technical forex, traders almost never, exist, in this world for some reason and again. Neither is their audience the. People they are talking to don't, know anything, about technical, analysis, so, if you're showing technical, analysis, to a bunch of people who have no idea what you're talking about the, best thing to show them is something dumb and easy like the RSI, so, don't. Think. That just because you see it on TV that it is more valid than anything else out there they're, using it because it's easy and they're, also using it because again like all those instructors who actually have, studied, technical analysis at some point they, don't know any better they don't know about all the other indicators, out there that work much much better so. Let's go ahead and touch on the last reason, that, I will, bet is one. Of the reasons why you still use the RSI and that's, because you've had some success with it before and I, went over this in the big banks video - it's called blackjack. Theory, or Vegas theory. If. You were to go to a blackjack table for the first time and, on the very first, hand, you would have actually gotten, a blackjack and gotten that two to one or six to five pay, off you know whatever they do that. Feeling, is so. Intense that, you, would allow yourself, to lose the next five to ten hands, before, ever even thinking, to yourself okay maybe this isn't the right game for me and God. Forbid in the next ten hands after that if you were to actually win, three, or four of them well then they. Got you you'll. Sit there and lose all your money and take it all the way down to zero before. Realizing. What's really going on here and the same can be said for the RSI the, big banks will give you a win with these things sometimes because if they didn't then you're just going to quit but. If they just give you a win here and there it is enough for you to hang on to this thing because the thrill of winning is so strong that, it overrides, any of the losses you might have in the future but. If were to just do this if you were to just make a separate, demo account and do nothing but trade with the RSI, and nothing else and. Track. Those wins and losses for, two months and see, where you actually were I bet. It's gonna paint a really, sobering picture but. Most people don't have the discipline to go out and do something like that and to test things that way they're so stuck in the euphoria, of those times where it actually works they, will ignore the times when it doesn't and when they look at their account at the end of the year it is way down so.
Let's Transition, out of the. Reasons why you probably use and I'll just tell you the reasons why I don't like it, don't. Forget the earlier slide the Dirty Dozen slide, a lot of times this was a reason, enough for most people to say oh wow, what. Am i doing yeah I need to move on to something different there, are clearly, better options, out there but. Let's just say that did not convince you, the. RSI, does not even do a good job at what it is supposed to do remember, that example, I showed you before whereas, trying to show you how well it worked and it ended up being complete. Calamity, to, your trading account, often. Even when it looks like it works it doesn't work and on top of this it was created, for stock trading I actually know some professional, stock traders many, of which will actually use a combination of technical analysis, and fundamental analysis. Because that's what you you're supposed to do when stock trading and, none. Of them use the RSI some. Of them did but as, soon as they were introduced to better options, they get rid of the RSI or right away it did not take long sometimes. It's just a matter of being shown a better option which, we hear on no-nonsense Forex, are going to do so, if, you haven't subscribed by, now subscribe, because you're gonna want to see this now. There is an a counter-argument. To. This and, it. Is an argument I have a really big problem, with they, say well the RSI, does work really well in range-bound markets, in trends. It doesn't work at all you, get murdered, but, in range, bound markets. It actually, works well so what do I mean by that if you don't understand what that means so, when. Price. Consolidates. And falls into this little range right here and when we say a range pretty. Much means it's hitting. A line here and a line here and when. It does that, people. Want to convince you that now this market is very easy to trade because. It's. Gonna bounce off here and if you're using the RSI, it's gonna give you a really nice short. Signal and when. It comes, here it's gonna give you a really nice long signal. Here. Is the problem, I have, with this guy's. You. Don't know when a range is coming it'd. Be so awesome if we did if, we were just be if we're just able to pick out some random point, on a chart and be like hey okay. Consolidation. Is just around the corner get, all your range trading tools out and we're, gonna we're gonna make a lot of money but it doesn't happen that way you only know, it when it's too late once you see a range actually forming, it is, probably, about to end I love, people who show, trend lines and. Support. And resistance lines like look how many times this thing has hit this line by, the time it has done that it. Is almost over, so, understand. This is not an actual chart this is just a drawing so how. Many times this hit 1 2 3 4 5, 6 7 8 times you, almost never ever see. That and if you do it is only a matter of time before, price. Breaks, out of that range it starts trending and if you're trading, a quote, range bound market, you, are going to get smashed because. When. Price does trend, and you're, trying to use these reversal, indicators, you get absolutely. Destroyed. Go. Watch that reversals. Video if you ever want to know why a price, trends. As long as it does sometimes it's. Because there are an endless supply of, reversal. Traders with their stochastic sand, their RSI trying. To call reversals, and as, long as those people outnumber the. People who are actually following the trend price. Is going to keep going and, these poor reversal, traders just get smoked, over. And over and over again any money, they made when price was consolidating, is erased, immediately. And then, the losses start happening so, let's go ahead and go to my charts and I will show you not cherry-picked. Examples, but actually real world right, now, examples. Of how. This thing just completely fall apart so. Here, is what I've done let's go ahead and push this forward just a bit this. Is a. Let's. Put it back even. This right here is about one year's worth of data, on. The. Most popular. Traded, currency, pair, by far and we're, on the daily chart which is the time, frame that everybody, should be trading if you didn't, already know that that was a podcast, episode I'll link that down below too but, I went ahead and put the RSI down below on the default setting that almost everybody uses and, let's.
Go Ahead and see on the world's biggest stage not. Some cherry-picked, example, on the most popular example, I could possibly, give you let's see how well this thing works now, didn't give you any signals, for a while, and then finally, gave you a little one right there, so. Let's. Go ahead and pull up a cursor and see how well that would have done. Now. It wants you to go short right here. On. This. Candle here now very. Next candle. Shot. Up about 70. Pips if you, would have stayed in that trade, you're. Telling me your stop-loss is more up. Here so. By the time it actually did give you some profit. It. Didn't even give you a hundred pips with a profit on the daily chart chances. Are like I said before if your stop-loss is up here your take profit is, down here somewhere and you, did not profit on this trade and, if. You didn't look, out because price, shot, back up right. Afterwards, now. Let's, look here we are now in, overbought. Territory, and you have a signal, here let's, check that one out. That. Would have come on. This. Candle, right here. The. RSI, is telling you to go short right on this, bar. And. You. Didn't make anything you. May you made 14 pips on the daily chart. Immediately. This thing shot way, up again. That. Would have been a tremendous loss depending, on where your stop-loss was. Now. The next one. This. One. It's hard to say I'm gonna be nice and give this one a pass because it's so borderline, but. Your next one was here, and I think this one actually worked let's. See. You. Guys want to zoom in I think it might be better if we just zoom in on this. So. You can see this a little better. This. One told you to enter it was at this candle, oh is. This candle here, so. This one did go down some and you, probably made a little bit there you didn't make a lot, but. There, was definitely room, to take some profit there but. It didn't give you that nice trend that you were wanting on the, reversal, it, came up back back up pretty quick so if you took half off down here half. As all you got because this thing shot right back upwards, so. In, this. Little cluster of. Shorts. It gave you there. Was some really bad losses and one. Medium-sized. Win maybe. And that was it so, let's, move over to here we're. Now. You're. Getting long signals. This. Was technically one. It. Got up there you can see on. That little tag here the RSI, is thirty point nine four so it did close above, that that would have given you a long signal let's see how that did I don't think it's too hard to. Recognize, that that did nothing but go short, you. Went long price, did nothing, but go short that that was really bad really. Bad. Look. At the next one on that. Little retracement, it gave you another long entry where. Was it right here, alright. Well, how many pips were you wanting on the daily chart hopefully, you're wanting more than 8087, you might have again, you might have taken a little bit of profit there but, for the most part you got no trend that you wanted and you got nothing, but futility, all the way down again this. Thing just keeps on killing, you. How. About this one this, one was actually good this. Was the win this. Is the win they used to keep you in the game because this one from the start. Did you well didn't, do you great like I said you want on the daily chart you were hoping to gain more than 150. Pips max. But. It did give you a win and then. Over here it, is yet to be seen but. Let's. Zoom back out, after. All. That all. Those entries, you. Had to little medium winds and a, bunch of losses, on the. World's biggest Forex, stage on. One. Of the most commonly. Used, indicators. On earth. Terrible. And, this. Is a currency pair that not only trended, but did quote, range, to actually don't even know if that can you really consider that arranged. There's. Your top. There's. The bottom it didn't really touch anything so yeah a lot of people would call this a range it's not even a range and there, is no money to be made here. When. It comes time to actually prove, it this thing just completely, falls, apart alright, we'll move on so. I mean have I given you enough evidence at this point I mean in conclusion it's real simple don't. Use the RSI, ever I mean the good news is there are much, much better options, out there and we're going to be talking about them over time and I'm going to bet you're going to want to know what those are and the best way to find out is to subscribe to this channel I mean. I have given you so much evidence, of why this thing is terrible and every, other youtube channel, out there and, twitter handle that actually uses this thing is not, doing, that they're showing you why it is a good idea to use the RSI and then, you wonder why you end up like the 99%. This. Channel has not been around very long and I have already changed, traders results. Instantaneously. Simply. By getting rid of something they're already using that isn't working just, imagine, how far along you're gonna be when this is all said and done but, you're not gonna get there with these other YouTube channels and these Twitter feeds that, are showing you the same dumb, garbage, over and over again there's no way you're, gonna be in that 99% your whole life and that's, not why you got into forex, trading in the first place if, you want to really get there click.
On The links below on, some, of my other videos and start. Changing. The way you think about everything. Into that point one percent mentality. And in return I will make sure that every single video I make from here on out is designed. To, get you that much closer and closer, to. Getting, out of that 99 percent and getting into that point one percent for good I will, see you on the podcast and I will see you in the next video as well all right guys go, get it.