#Bitlayer What is the RSI Indicator?
📌 Relative Strength Index (RSI) for Beginners
The RSI, or Relative Strength Index, is a technical analysis tool used to measure the strength of price movement and determine whether a currency or stock is overbought or oversold.
---
🔍 How does the RSI work?
The indicator moves between 0 and 100.
Above 70: The market is overbought (a correction or decline may be imminent).
Below 30: The market is oversold (a rebound or rise may be imminent).
Between 30 and 70: The market is in a normal, non-overbought state.
---
📊 Default Settings
Most traders use a 14-candle setting (can be minutes, hours, or days depending on the time frame).
Settings can be changed depending on your trading style, but 14 is the most common.
---
💡 How can we benefit from the RSI?
1. Identifying Potential Reversal Zones
If the RSI reaches above 70, we may start considering selling or taking profits.
If the RSI drops below 30, we may look for buying opportunities.
2. Confirming the Trend
If the RSI is above 50, the trend is likely bullish.
If it is below 50, the trend is likely bearish.
3. Detecting Divergences
If the price is rising but the RSI is falling, a decline may be imminent.
If the price is falling but the RSI is rising, a rise may be imminent.
---