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RSI Swing Failure Forex Trading Setup

RSI swing failure can be a very accurate method for trading short term currency moves. It can also be used for trading long term trends but it is best suited for short term trading especially for those traders that trade reversals.

 

The RSI failure swing is a confirmation of a pending market reversal. This setups a leading breakout signal, it warn that a support or resistance level in the market is going to be penetrated. This setup should occur at values above 70 for an upward trend and values below 30 in a downward trend.

 

Swing Failure In an Upward Trend

If the RSI hits 79 then pulls back to 72, then rises to 76 and finally drops to below 72 this is considered a failure swing. Since the 72 level is an RSI support level and it has been penetrated it means that price will and follow and it will penetrate its support level.

 

In the example below, the RSI hits 73 then pulls back to 56, this is a support level. The indicator then rises to 68 and then drops to below 56, thus breaking the support level. The price then follows afterwards breaking it support level. The swing failure is a leading signal and it is confirmed when price also breaks it support level. Some forex traders open trades once the swing failure is complete while others wait for price confirmation, either way it is for a trader to decide what work best for them.

 

RSI Swing Failure in an upward trend

Swing Failure in an upward trend

 

Swing Failure In a Downward Trend

If the RSI hits 20 then pulls back to 28, then falls to 24 and finally penetrates above 28, this is considered a failure swing. Since the 28 level is an RSI resistance level and it has been penetrated it means that price will and follow and it will penetrate its resistance level.

RSI Swing Failure in a downward trend

Swing Failure in a downward trend

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