How to Use RSI for Buy & Sell Signals! The Relative Strength Index (RSI) is a momentum indicator that helps traders identify overbought and oversold market conditions. It ranges from 0 to 100, with two key levels:
✅ RSI < 30 → Oversold: The asset is potentially undervalued, indicating a buying opportunity.
🚨 RSI > 70 → Overbought: The asset is potentially overvalued, signaling a potential sell-off.
How to trade it?
- When RSI drops below 30 and then moves back up, it suggests a bullish reversal (see green arrows).
- When RSI goes above 70 and then turns down, it signals a potential downtrend (see red arrows).
How long should you hold your position?
A great tip is to stay in the trade until RSI approaches the opposite extreme. For example:
- If you enter when RSI is below 30, hold until it nears 60-70 for an optimal exit.
- If you sell when RSI is above 70, you can hold a short until it drops near 40-30.
In the chart, you can see how the RSI accurately predicted major turning points in the market!
⚠️ Pro Tip: RSI works best when combined with other indicators like volume or moving averages to confirm signals!
