Article Content:
The Relative Strength Index (RSI) is one of the most widely used tools in technical analysis. But what exactly is it, and how can you use it effectively in your trading strategy?
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What is RSI?
RSI is a momentum oscillator that measures the speed and change of price movements. It ranges from 0 to 100 and helps traders identify overbought or oversold conditions in a market.
RSI > 70 — Market may be overbought
RSI < 30 — Market may be oversold
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How to Use RSI
1. Trend Confirmation:
If RSI is above 50 and the trend is upward, it's a bullish sign.
2. Divergences:
If the price is making new highs but RSI isn’t, it could be a sign of a reversal coming.
3. Support & Resistance on RSI:
RSI levels can act as their own support/resistance zones for price behavior.
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Pro Tip: Combine RSI with Volume
RSI alone can give false signals. Always combine it with volume or other indicators like MACD or moving averages for better accuracy.
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Final Thoughts
RSI is a beginner-friendly yet effective tool. With a little practice, it can improve your market timing and risk management.