👉Its one of the leading indicator which measures the strength of any movement in price of any script.
👉It moves between two extremes (0—100).
👉we consider above 70 overbought while below 30 indicates oversold sentiments.
👉50—70 is as zone where traders buy the script by considering other factors (BO, Divergences)
👉Below 40 is weakness zone where some traders do selling/short selling
👉40-50 is an indecision zone where most of the traders avoid trading & wait for BO
RSI Divergence forms when the price makes a higher high, but the RSI indicator makes a lower high in an uptrend market. In a bearish move, this happens oppositely, when the price makes lower lows and the RSI makes higher lows.
👉Buy on bullish or positive divergences
👉Sell on Bearish or negative divergences
Wait if divergence is very low in nature
Remember more the divergence better the success rate of trade
Some examples:
This is my first answer on quora. I will try to give my best out of my 5 years trading career.
#learnwithBullbuzzer
Credit of content: Raynor Teo (My Guru)
RSI: Relative Strength Index
it is momentum indicator
very important to understand what is momentum indicator, it shows the strength of the trend momentum
so how RSI is an momentum indicator
when RSI is over 80, it shows the price of stock has rallied a lot and a correction will be near soon
but here's the catch
how much correction can never be measured by RSI
and traders who use RSI for trading fall in the trap losing money
when RSI is below 20, it shows downtrend momentum is lost and there will soon be some pull back
and then again how much pull back can never be measured by RSI
always see trend in RSI also, most important is VOLUME
if price is falling with high Volume, RSI doesn't matter
most significant indicators are trend and volume
use indicators like RSI, MACD in collaboration with them, but never take trading decision completely based on them
0 Comments