RSI indicator: a simple guide to application 🚀

Financial markets are constantly changing. Traders are looking for effective analysis tools. RSI, created by Wilder in 1978, is one of them. It measures the speed of price changes. It helps to see potential reversals. It seems quite useful. 🔍

Basics of RSI 📊

RSI calculates the ratio of gains to losses. Usually over 14 days. The scale ranges from 0 to 100. Prices move in cycles. This is the key idea. Understanding cycles provides trading opportunities.

Four key RSI signals:

1. Overbought and Oversold 🌡️

   • Above 70 - prices seem to be overheated
   • Below 30 - it seems that it has fallen too much

2. Divergence ⚡

   • Price is falling, RSI is rising - possible upward movement
   • Price is rising, RSI is falling - possibly down soon

3. Line 50 ↕️

   • Over 50 - trend rise
   • Under 50 - trend down

RSI Settings for Different Situations 🛠️

The default settings are not always ideal. They can be changed to suit your needs:

1. Time period:

   • Usually 14
   • Fast Trading: 7-9
   • Long-term: from 21

2. Overbought/Oversold Levels:

   • Stable market: 40/60
   • Volatile market: 20/80 for reliability 🔥

3. Mix with other indicators: RSI + SMA provides better signals

Trading Strategies with RSI 💹

Proven approaches:

1. Divergences 📈

   • RSI rise, price down → buy
   • RSI down, price up → sell

2. Breakthrough of levels 🚀

   • Broke 70 down → sell
   • Broke 30 upward → buy

3. Reversals after extremes 🔄

   • Was above 70, went down → sale
   • Was below 30, went up → buy

Interestingly, September 2025 shows a rise in the use of RSI with fundamental analysis. It is not entirely clear why now. Statistics from recent quarters seem to confirm the effectiveness of the market adjustment. 📊

RSI - a powerful tool. But not a panacea. It gives false signals. Especially in strong trends. The indicator gets stuck in overbought or oversold zones. It can be unpleasant. 🌕

Practice! Master the nuances! RSI will become your reliable assistant! 🚀