The RSI was invented by J. Welles Wilder in the late seventies. It measures the momentum of the price. When it is increasing, the bulls are taking over the market. If it decreases, the bears are in charge.
The RSI can be used in different trading styles and for various purposes. Usually, traders all around the globe use the indicator by defining overbought and oversold zones.
Overbought zones are identified as areas where the price has risen a lot in a small interval of time. Then, suggesting that the price is overbought and that it can have a trend reversal or correction. Therefore signaling a sell point.
Oversold zones are the other side of the coin. They are areas where the price has decreased suddenly in a relatively small period of time. They are usually interpreted as buy points since the price is likely to go back up.
How to use the RSI indicator to trade in the market?
The RSI interpretation seeks to give indications on the speed with which the market goes up or down. To carry out a good analysis of the RSI, the following zones are used:
- Between 0 and 30, the RSI indicates an oversold zone. Therefore, it is necessary to avoid selling in such a period.
- Between 70 and 100, it indicates an overbought zone. Better to avoid buying at such times.
- Between 30 and 70, he gives no specific information.
What strategies does Bottrex provide for RSI?
- Below Value: When the current value is below the value you set.
- Above Value: When the current value is above the value you defined.
- Ascending Crossing: When the current value crosses above the value you defined. Ex .: Current value at 30. If in the previous candle it was at 29, then it went up and crossed the 30 and went to 31, it can mean an entry. This option comes with a safety limiter not to buy when the current value of the indicator is above its value + 10, example: if you set the value to 30, your safety limit will be 40 and the robot will only open orders when the current value is below 40.
- Downward Crossing: When the current value crosses below the value you defined. Ex .: Current value at 30. If the previous candle was at 31, then it went down and crossed the 30 and went to 29, it can mean an entry.