$BTC
Understanding RSI: A Simple Guide 📊
The Relative Strength Index (RSI) acts like a speedometer for price momentum, measuring how strong the market moves on a scale from 0 to 100.
How RSI Works:
1. Track Price Movement: Monitor green candles (gains) and red candles (losses) to understand market direction.
2. Calculate RSI: It compares the strength of upward and downward price moves over the past 14 days.
3. Generate Signals: RSI helps identify when the market is stretched too far in either direction.
Using RSI to Your Advantage:
Buy Signal: When RSI falls below 30 (the oversold zone), it might signal a good buying opportunity.
Sell Signal: When RSI rises above 70 (the overbought zone), it could indicate a chance to sell.
Divergence Strategy: Watch for mismatches between price action and RSI, which often hint at upcoming reversals.
Real-World Example:
Imagine ETH’s price is dropping and RSI hits 22, showing heavy selling pressure. A smart move could be to:
1. Open a long trade at RSI 22.
2. Place a stop-loss just below key support.
3. Close the trade once RSI climbs back to 50–60.
Mastering RSI lets you make smarter trading choices and spot potential market moves before they happen.
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