Hi guys, today I will be explaining how to use the Relative Strength Index (RSI) to your advantage. First of all if you have not already, please follow me. Okay, so the RSI is commonly said to buy when oversold and sell when it is overbought. However, this strategy does not always work, and can result in you predicting what the security will do.
First Step: You should first check to see if the RSI is making higher lows, or lower lows. This is important because it can show whether the asset has strong buying pressure or weak buying pressure. I call it buying pressure because the index essentially represents the demand for it. So, why would you short something, when tons of people are buying in? However, the index can work short term, if you are day trading, but does not work as well for swing traders. If you see a rising RSI it is a good sign, and the opposite for a falling.
Second Step: This is a step where most people don't do, but I think is very important. The step is to check whether or not the asset has an RSI that is hitting overbought, or hitting oversold. In this example, Gold is hit oversold two times. This proves how weak gold is and why it could have a breakdown. Another thing to check in this step is if it stops falling at the oversold level and does not fall beneath. If this occurs, it is a great sign because it shows that the asset is strong. For Gold, it had done that, and if you had spotted that you could have made 40%! In sum, the second step is to see if the asset is hitting overbought levels (good), or hitting oversold levels (bad).
Third Step: The next step is to draw support and resistance levels, look at other indicators, etc. You could even look at fundamental data to support your technical data.
Last step: Your last step is to place you limit order, and or stop order.
Thanks for viewing guys, and please like and follow. Thanks!
First Step: You should first check to see if the RSI is making higher lows, or lower lows. This is important because it can show whether the asset has strong buying pressure or weak buying pressure. I call it buying pressure because the index essentially represents the demand for it. So, why would you short something, when tons of people are buying in? However, the index can work short term, if you are day trading, but does not work as well for swing traders. If you see a rising RSI it is a good sign, and the opposite for a falling.
Second Step: This is a step where most people don't do, but I think is very important. The step is to check whether or not the asset has an RSI that is hitting overbought, or hitting oversold. In this example, Gold is hit oversold two times. This proves how weak gold is and why it could have a breakdown. Another thing to check in this step is if it stops falling at the oversold level and does not fall beneath. If this occurs, it is a great sign because it shows that the asset is strong. For Gold, it had done that, and if you had spotted that you could have made 40%! In sum, the second step is to see if the asset is hitting overbought levels (good), or hitting oversold levels (bad).
Third Step: The next step is to draw support and resistance levels, look at other indicators, etc. You could even look at fundamental data to support your technical data.
Last step: Your last step is to place you limit order, and or stop order.
Thanks for viewing guys, and please like and follow. Thanks!