How do I set up Relative Strength Index, and how does it help in trading?
A Relative Strength Index (RSI) indicator is used to determine the asset price movement magnitude and speed. It is one of the most popular indicators used by traders. An RSI is displayed as an oscillator on a scale from 0 to 100.
How to calculate a Relative Strength Index (RSI)
You can calculate the RSI by the following formula:
RSI = 100 - (100 / (1 + RS))
RS is calculated as follows:
- calculate the average value of positive price movements
- calculate the average value of negative price movements
Then, use the formula RS = average of positive price movements/average of negative price movements.
Once calculated, the RSI line is plotted below the price line.
How to use an RSI
The RSI changes from 0 to 100. If the RSI climbs over 70, it signals that the asset is overbought, and soon, a trend reversal may come. So, you may consider selling the asset. If the RSI drops below 30, it means that the asset is oversold, and soon, a trend reversal may come. So, you may consider buying the asset.
Do not forget that the RSI is not a reliable indicator, and an asset may stay in an oversold or overbought condition for a long time without a trend reversal. That’s why it is recommended to use the RSI in combination with other signals.
How to set up RSI
To set up signals based on an RSI movement, open the Alerts tab.
- Pick the exchange.
- Select the coin pair for which you want to receive alerts.
- In the Select indicator field, pick RSI - Relative Strength Index.
- Click on the Set Alert button.
That’s it. Now, you will receive alerts as soon as a Buy or a Sell signal comes.
If you want to change the alert settings, click on the Open Settings button in front of the alert, and implement the required changes.
To delete the alert, click the Delete Signal button in front of the alert you want to delete.