Use of RSI indicator
๐ What is RSI?
RSI = Relative Strength Index.
Itโs a momentum indicator that measures if a coin or stock is overbought or oversold.
Range: 0 โ 100
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๐ RSI Levels to Remember
Above 70 = Overbought ๐ฎโ๐จ (Price may drop soon)
Below 30 = Oversold ๐ด (Price may bounce up)
50 = Neutral โ๏ธ (Trend direction can go either way)
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๐ ๏ธ How to Use RSI in Trading
1. Overbought Signal (Sell) ๐ป
If RSI goes above 70, the asset might be too expensive.
Traders take it as a chance to sell or avoid new buys.
๐ Example: Bitcoin RSI hit 85 in April 2021 before a correction.
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2. Oversold Signal (Buy) ๐ผ
If RSI drops below 30, the asset might be too cheap.
Traders take it as a chance to buy or look for a reversal.
๐ Example: Ethereum RSI fell to 25 in March 2020 before a strong rally.
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3. RSI Divergence ๐
If price makes new highs but RSI makes lower highs, itโs a bearish divergence ๐ป (trend may weaken).
If price makes new lows but RSI makes higher lows, itโs a bullish divergence ๐ (trend may reverse upward).
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4. RSI with Trend Confirmation ๐๐
Donโt use RSI alone. Combine with support/resistance, moving averages, or volume for stronger signals.
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โ ๏ธ Important Notes
RSI works best in sideways markets.
In strong uptrends, RSI can stay over 70 for a long time (not always a sell).
In strong downtrends, RSI can stay under 30 for a while (not always a buy).
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โ Quick Summary:
RSI < 30 โ Oversold โ Possible Buy ๐ผ
RSI > 70 โ Overbought โ Possible Sell ๐ป
Divergence โ Watch for Trend Reversal ๐
