How to use RSI Indicator (RSI technique)
I am not enough good for trading but I love trading even doing technical analysis. I will suggest you do the technical analysis on a higher time frame because technical analysis works very nice on the higher time frame but it works also lower time frame but some you will get false analysis on the lower time frame. However, I would like to share a technical method using RSI (Relative Strength Index). You may know that this is the indicator to filter your strategy to take the good entry. So let’s see the RSI technique.
RSI most usages and regular uses period are 30, 50 and 70. 50 is the middle point (short or long indication), 30 is the lower level (below the 30 level it’s mean oversold) and 70 is the higher level (above the 70 level it’s mean overbought).
See the example:-
See the first picture for example of overbought RSI cross the 70 level which is yellow color rounding by yellow color, don’t afraid red color line is the moving average with 9 periods. You can see that chart when the RSI had gone to 70 level then RSI above the MA (Moving Average). You can use 9-period MA to filter RSI better. If you would like to take a position using the RSI then RSI must be above the MA if not then don’t make any position. Same things for a sell trade.
We can see the another example for overbought. Yellow color arrow with a red color vertical line means overbought and red color arrow with a yellow color vertical line means the price correction for going to again up.
And the last picture we can see oversold and correction level. All the technique will be applied to trend market. Don’t make any trend without trend market.
So what we learn from here.
When can we Buy?
The market must be Up Trend.
When the price above 50 level RSI and also 9 periods MA.
When can we Sell?
The market must be Down Trend.
When the price below the 50 level RSI and also 9 periods MA