I do not pretend to be an educator. I don't even play one on TV. But for the sake of this post I will tag this information as "Educational" rather than "Analysis" as I did the markup as a personal training exercise rather than during an active trade. In other words, the marking on the chart were done after the fact and not based on any corresponding trades I may have made during the same time periods. I do, of course, intend on using this data going forward for future trades.
The subject of this post is the Daily RSI as it pertains to BTC
The RSI, or Relative Strength Index is an oscillator that simply measures buying or selling pressure and fluctuates back and forth over or under the 50 line. (White dotted line) Positive "bullish" buying is occurring while the RSI is over 50. Bearish selling pressure is occurring when the RSI is under 50. When the buying pressure gets extremely bullish it will touch or even cross above the 70 line (Green dotted line) and is often referred to as "Over Bought". When an overbought condition develops and coincides with other chart patterns, candle patterns, Elliot Wave patterns, etc. this can be a very good place to open new short positions or take profits on existing long positions.
When the RSI goes below 50 into bearish territory and touches or drops below the 30 line (red dotted line) it is often referred to as "Over Sold" and is a good place to open new long positions or take profits from existing short positions as the trend may be about to change. Just like with the bullish scenario is it always necessary to combine your interpretation of the RSI along with other oscillators such as the MACD, Stochs, etc. as well as marry your move with complementary chart patterns, fibs, waves, etc. that support your anticipated actions.
As you can see on the chart I have circled both the RSI and the chart to indicate when it would have been a good time to buy (green circles) or sell (red circles). If you study the RSI and your charts for any length of time it becomes easy to see how the RSI can complement your trading activity. For example, when the RSI is in an over sold condition after many days of decline and ends with a long pin low type candle on the chart that has proven to several times to be a good long entry. Especially when it coincides with other indicators. The same is true for taking long profits or going short when over bought RSI conditions exist along with corresponding pin high candles. You can see several of these on the chart.
This is obviously not a complete journal of all the ways the RSI can be interpreted. There are many other ways such as bullish and bearish divergences, line touches, crossovers, failures, and other patterns in the RSI. I just wrote this to peak your curiosity to go out and find more information on the subject. Hope it helps.
And no, I did not actually make all those perfect trades, but I do plan on keeping RSI analysis as one of my primary tools in my trading toolbox!
If this has been of value to anyone new to trading please feel free to give me a thumbs up for the effort. If my writing insults the intelligence of crusty old traders that learned all this stuff in their first month of trading then my apologies in advance. :D
Either way, have a nice day!
The subject of this post is the Daily RSI as it pertains to BTC
The RSI, or Relative Strength Index is an oscillator that simply measures buying or selling pressure and fluctuates back and forth over or under the 50 line. (White dotted line) Positive "bullish" buying is occurring while the RSI is over 50. Bearish selling pressure is occurring when the RSI is under 50. When the buying pressure gets extremely bullish it will touch or even cross above the 70 line (Green dotted line) and is often referred to as "Over Bought". When an overbought condition develops and coincides with other chart patterns, candle patterns, Elliot Wave patterns, etc. this can be a very good place to open new short positions or take profits on existing long positions.
When the RSI goes below 50 into bearish territory and touches or drops below the 30 line (red dotted line) it is often referred to as "Over Sold" and is a good place to open new long positions or take profits from existing short positions as the trend may be about to change. Just like with the bullish scenario is it always necessary to combine your interpretation of the RSI along with other oscillators such as the MACD, Stochs, etc. as well as marry your move with complementary chart patterns, fibs, waves, etc. that support your anticipated actions.
As you can see on the chart I have circled both the RSI and the chart to indicate when it would have been a good time to buy (green circles) or sell (red circles). If you study the RSI and your charts for any length of time it becomes easy to see how the RSI can complement your trading activity. For example, when the RSI is in an over sold condition after many days of decline and ends with a long pin low type candle on the chart that has proven to several times to be a good long entry. Especially when it coincides with other indicators. The same is true for taking long profits or going short when over bought RSI conditions exist along with corresponding pin high candles. You can see several of these on the chart.
This is obviously not a complete journal of all the ways the RSI can be interpreted. There are many other ways such as bullish and bearish divergences, line touches, crossovers, failures, and other patterns in the RSI. I just wrote this to peak your curiosity to go out and find more information on the subject. Hope it helps.
And no, I did not actually make all those perfect trades, but I do plan on keeping RSI analysis as one of my primary tools in my trading toolbox!
If this has been of value to anyone new to trading please feel free to give me a thumbs up for the effort. If my writing insults the intelligence of crusty old traders that learned all this stuff in their first month of trading then my apologies in advance. :D
Either way, have a nice day!