What is RSI?
Vietnamese RSI (Relative Strength Index) is a relative strength index. It is an indicator used in technical analysis.
This is a useful tool in and applied in transactions: securities, foreign exchange or even cryptocurrencies. With this indicator you will know the bullish or bearish signals.
The indicator was developed by a mechanical engineer J. Welles Wilder in 1978.
What does the RSI indicator tell us?
Let's first take a look at the formula of the RSI!
RSI = 100 - [100 / (1 + (Change in price average increase / Change average price down))]
From this formula we see an indicator showing the correlation between the buyer and the seller. The RSI indicator is expressed from 0-100 level and the equilibrium level will be 50.
In addition, you also know the overbought area if the index exceeds 70 (buyers dominated) and oversold if the index is below 30 (the seller prevails).
This means that when the RSI exceeds 70, the price may turn and decline. When RSI is below 30, it shows that the selling pressure has decreased and the price is likely to rise again.
How to use the RSI indicator
The most traditional and basic way to use the RSI is to consider selling when the index exceeds 70 and buying when the index is below 30.
But this way is often not very effective. Because if that's so easy, there's no way anyone can swing right.
Another simple way is to use the level 50. In an uptrend market (bullish market) RSI will range from 40-90 with the 40-50 zone is support. And in a bearish market, the RSI will range from 10-60 with the 50-60 zone resist.
There are also many ways to use this indicator in addition to the ones I mentioned above. To know then with Blogtienao learn more offline!
For divergence, there are also 2 divided into 2 types: positive divergence (Bullish Divergences) and negative divergence (Bearish Divergences).
A bullish divergence is created when the RSI bottom creates a higher lower bottom than the previous low (bottom) and a lower low.
It shows momentum and is a sign that you can buy or open a long position.
A diverging divergence is created when the RSI bottom forms a lower high below the previous high (higher high) and a higher low.
It may indicate a downside appearance, so you might consider selling out or opening a short position.
RSI pclosed period
At this point I was talking about regular divergence as you saw the result is usually reversed from decreasing to increasing or from increasing to decreasing.
But here I am going to show everyone about hidden divergences. Price will continue the uptrend or downtrend.
To recognize this type, it will also have two types of Bullish hidden divergences and Bearish hidden divergences.
Closed divergences increase
An increase in closed divergence is created when the RSI creates the lower low, the lower low and the higher low.
When you recognize this signal, you will know the price will continue to trend up.
Hermetic divergences decrease
A closed divergence is formed when the RSI creates a higher high, the higher high and a higher low.
This is a signal that the indicator also offers that prices will continue the downtrend.
Draw a trend line for the RSI
We often draw trend lines trendline give the right price! But now we know the indicator Relative Strength Index you can draw trendlin
Put the models in the RSI
Models are commonly applied to prices such as: 2-vertex (bottom), wedge, cup and handle model, ... You can apply for RSI indicator too.
Instructions for using RSI indicator setup on Tradingview
Tradingview is a useful tool for technical analysis that is easy. These drawings are now on Tradingview.
Step 1: Create a Tradingview account and select the trading pair
If you do not know how to create it, please refer to the article about Tradingview hey home.
Step 2: Select the type of assets you want to trade
You choose the type of asset you buy the transaction by entering its name or code in the Search Ticker box at the top. Here I choose Bitcoin to trade.
Once selected, you click the Full featured chart button to be able to use its functions.
Choose Indicators or press the button “/“. Next you search for RSI and then look to Relative Strength Index. You just need to click on it to finish.
To draw like the pictures I have shown above, you use the left toolbar to draw dentist.
Things need to notice
Indicators are also just an aid in trading, so we should not trust 100% absolutely on it. Especially, we only use one indicator.
When the market tends to increase or decrease sharply.
Hopefully this article will help you understand the RSI and how to use it! If you have any questions, please comment below.
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Wished everyone success!