Understanding RSI (Relative Strength Index) in Trading
RSI is a momentum indicator that helps determine whether an asset is overbought or oversold. It moves between 0 and 100, and traders use it to predict price reversals.
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1. RSI > 70 → Overbought (Possible Selling Zone)
Meaning: The asset is overbought, and a price correction (drop) is likely.
Action: Consider taking profits or waiting for a pullback before entering a new buy.
Example: If BTC's RSI is 85, it suggests a potential drop soon.
📌 In your BTC/USDT chart (RSI = 85)
BTC is overbought, so a pullback to 98,500–98,000 might happen before another move up.
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2. RSI < 30 → Oversold (Possible Buying Opportunity)
Meaning: The asset is oversold, and a price bounce (uptrend) may occur.
Action: Consider buying as the price might reverse upwards soon.
Example: If BTC's RSI is 25, it could indicate a potential bottom.
🔹 Best Strategy:
If BTC’s RSI drops below 30, buy near support levels and wait for a bounce.
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3. 30 ≤ RSI ≤ 70 → Neutral Zone (No Clear Trend)
Meaning: The market is in balance (not overbought or oversold).
Action:
If RSI is rising toward 70, it suggests bullish momentum (possible buy).
If RSI is falling toward 30, it suggests bearish momentum (possible sell).
Example: If BTC’s RSI is 50, the price could move in any direction depending on market conditions.
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How to Trade Using RSI?
✅ BUY when RSI < 30 → Wait for confirmation before entering.
✅ SELL when RSI > 70 → Lock in profits before a possible drop.
✅ Use RSI with other indicators (candlestick patterns, support/resistance) for better accuracy.
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