Typically, an RSI less than 30 is considered a bullish sign, while RSI above 70 is regarded as a bearish sign. Conversely, an RSI of 30 or below suggests an oversold or undervalued condition. To calculate Relative Strength Index, we need a specified time period. We take the average gains of a crypto’s price and divide that by its average loss. RSI is considered overbought when above 70 and oversold when below 30. These traditional levels can also be adjusted to better fit the security or analytical requirements. Raising overbought to 80 or lowering oversold to 20 will reduce the number of overbought/oversold readings.
Another indicator that can help you is the MACD indicator. It differs from the RSI, so the signal could be even stronger. The signal to close the position will appear as soon as RSI falls below the 70 level. To avoid making unsubstantiated statements, we present a strategy you can use for trading with the RSI indicator. The relative strength index is one of the most accurate indicators.
Step five: Once you make your entry, place a stop loss.
We like seeing entries triggered on either the 30 minute time frame or the hour time chart. The day it can’t easy to get twisted around when money on the line so a ‘fast glance’ 4 color system really helps. Should go well with the many strategies you’ve offered. Australian regulator ASIC is totally toothless and disinterested in retail trader scams. The most important feature for me would be to get consistent results under all market conditions, i.e. reliability that can be trusted at all times. I recommend you follow at least a 1 to 3 profit vs. risk level.
- Remember that our example is a current downtrend looking to break to the upside.
- You wait for the price to head in the direction of the trade and wait for a candle to close above the first candle that you identified that was previously 50 candle low.
- The distance traveled by the RSI is proportional to the magnitude of the move.
- All three signals should be received during three candles, otherwise, they will lose their value.
- You can adjust the appearance of the RSI to your liking, but make sure to keep price lines between 30 and 70 like above.
The trade could be held at least until the RSI indicator reaches the 50 mark, at which point you could close a portion of your position. To enter a RSI trade, you need to see a signal from the RSI indicator.
The Relative Strength Index can be a powerful tool, especially for day traders. How to Use RSI Indicator Of course, you can’t overly rely on it as the result is never guaranteed.
RSI is a versatile momentum oscillator that has stood the test of time. Despite changes in volatility and the markets over the years, RSI remains as relevant now as it was in Wilder’s days. While Wilder’s original interpretations https://www.bigshotrading.info/ are useful to understanding the indicator, the work of Brown and Cardwell takes RSI interpretation to a new level. Adjusting to this level takes some rethinking on the part of the traditionally schooled chartists.