Becoming a Profitable Trader; How to Read the RSI Indicator.
Hello Traders! CTDave here again with a tutorial on how to read RSI indicator.
RSI is a good tool when you need to know when to take profit, especially for those who use a shorter timeframe chart. It is not very good for signaling when to buy or sell. Traders use it mainly as a confirming indicator rather than when entering a position; they use other indicators to get the buy and sell signals.
To calculate the RSI, you have the following formula:
RS = (Average of Close - Previous Close on Green Bars) / ( Average of Previous Close - Current Close on Red Bars)
RSI = 100 - (100 / (1 + RS))
This indicator is an oscillator which means that it goes from 0 - 100. Generally, when it goes above 70, that means that the currency is overbought which usually means that it's going to go down shortly, and that's where you can take profit from a long. When it goes below 30, the reverse is true -- the crypto is oversold which usually means that it's going up which is where you take your profit on a short. On some cryptocurrency's you might find it useful to use to 80 and 20 level as a signal. Some instances might even be at 90 and 10. You must experiment with them which ones are more profitable.
From the chart, you can see the whenever the RSI reached the level, BTC went the other direction.
As always, I encourage everyone to please like, comment, and share my ideas, and follow me for more of these posts to be kept updated. Happy trading! Thank you!
Note: I am not a financial advisor, please do not trade solely based on my trading decisions. Do your own research or consult a professional financial advisor before conducting a trade.
RSI is a good tool when you need to know when to take profit, especially for those who use a shorter timeframe chart. It is not very good for signaling when to buy or sell. Traders use it mainly as a confirming indicator rather than when entering a position; they use other indicators to get the buy and sell signals.
To calculate the RSI, you have the following formula:
RS = (Average of Close - Previous Close on Green Bars) / ( Average of Previous Close - Current Close on Red Bars)
RSI = 100 - (100 / (1 + RS))
This indicator is an oscillator which means that it goes from 0 - 100. Generally, when it goes above 70, that means that the currency is overbought which usually means that it's going to go down shortly, and that's where you can take profit from a long. When it goes below 30, the reverse is true -- the crypto is oversold which usually means that it's going up which is where you take your profit on a short. On some cryptocurrency's you might find it useful to use to 80 and 20 level as a signal. Some instances might even be at 90 and 10. You must experiment with them which ones are more profitable.
From the chart, you can see the whenever the RSI reached the level, BTC went the other direction.
As always, I encourage everyone to please like, comment, and share my ideas, and follow me for more of these posts to be kept updated. Happy trading! Thank you!
Note: I am not a financial advisor, please do not trade solely based on my trading decisions. Do your own research or consult a professional financial advisor before conducting a trade.