Using the RSI with the 100 Exponential Moving Average (EMA 100) provides deeper insight because the EMA is more sensitive to price action than the simple average. Let's rewrite the examples with a focus on the 100 EMA.
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Scenario 1: Buy on a bullish reversal
1. Context:
The price is moving below the 100 EMA for a long time (bearish trend).
RSI indicator reaches oversold zone (below 30).
The price starts to gradually rise and breaks the EMA 100.
2. Signal:
If the RSI bounces from the 30 area, and the price successfully breaks the 100 EMA upwards, this is a strong buy signal.
3. Practical application:
Entry: When a candle closes above EMA 100.
Stop Loss: Below the low of the last candle before the breakout.
Target: Near top or resistance level.
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Scenario 2: Sell on a bearish reversal
1. Context:
The price is moving above the 100 EMA for a long time (uptrend).
RSI indicator reaches overbought zone (above 70).
The price starts to decline and breaks the 100 EMA downwards.
2. Signal:
If the RSI drops from the 70 area, and the price breaks the 100 EMA downwards, it is a strong sell signal.
3. Practical application:
Entry: When a candle closes below EMA 100.
Stop Loss: Above the high of the last candle before the breakout.
Target: Nearby support level or previous bottom.
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Scenario 3: Confirm the trend with EMA 100 and RSI
1. Context:
The price is moving steadily above the EMA 100.
The RSI indicator is moving between 40 and 70, without entering the overbought zone.
2. Signal:
The price is in line with the uptrend supported by the 100 EMA, and the RSI indicator is indicating positive momentum.
3. Practical application:
Entry: When the price bounces off the 100 EMA after retesting it.
Stop Loss: Just below EMA 100.
Target: Resistance level or nearby top.
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Practical example (hypothetical data)
Time frame: 5 minutes.
Original price: $50.
EMA 100: It represents a dynamic line that reflects the trend more sensitively.
RSI: Shows oversold (25) or overbought (75).
Purchase scenario:
The price drops to $48 below the 100 EMA, and the RSI reaches 25.
The price starts to recover and breaks the 100 EMA at $49.
Entry at $49.50 with a stop loss of $48.50.
Target $51.
Selling scenario:
The price rises to $52 above the 100 EMA, and the RSI reaches 75.
The price is falling below the 100 EMA at $51.50.
Entry at $51 with stop loss at $52.
Target $49.
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Tips when using RSI with EMA 100
1. Difference from SMA 100:
EMA 100 reacts faster to price changes, giving more accurate signals in volatile markets.
You may find faster opportunities when the price crosses the EMA 100 than the SMA 100.
2. Filter out false signals:
If the price is moving away from the 100 EMA, make sure that the RSI supports the analysis (such as being above 50 in an uptrend).
3. Appropriate time frame:
On smaller time frames (such as 5 minutes), the EMA 100 provides faster signals and is more reactive to market fluctuations.
Good luck
