The weekend market fluctuations are not significant, let me teach you the application of indicator #RSI , which can be used to assist in placing orders.
RSI (Relative Strength Index) analyzes market buying and selling intentions and strength by comparing the ratio of closing price increases to total volatility over a period of time, thereby predicting future market trends and reflecting the degree of market prosperity over a certain period.
The basic principle of RSI is that in a normal market, the strength of both buyers and sellers must be balanced for prices to stabilize.
The value range of the RSI indicator is between 0 and 100, where RSI=50 is the dividing line between a strong market and a weak market. When the RSI curve breaks down through the 50 level from above, it indicates that the market has turned weak;
When the RSI curve breaks through the 50 level from below, it indicates that the market is starting to strengthen.
For defining overbought and oversold zones, investors can determine based on the specific market conditions.
In a general market, an RSI value (usually assessed with the 6-day RSI) above 80 can be considered overbought, while below 20 can be considered oversold.
However, in a bull market, the overbought zone can be defined as above 90, and the oversold zone can be defined as below 30;
in a bear market, the overbought zone can be defined as above 70, and the oversold zone can be defined as below 10.
To put it simply, it can be understood as divided into 5 zones, and one can assess market strength based on the zone where the indicator value falls:
Market Strength Suggested Action
80~100 Extremely Strong Sell
60~80 Strong Buy
40~60 Moderate Hold
20~40 Weak Sell
0~20 Extremely Weak Buy
Calculation formula (N is the number of periods for RSI):
RSI =
Sum of rising bars within N bars × 100
Divided by
(Sum of rising bars within N bars + Sum of falling bars within N bars)
