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With the market going crazy, it's interesting to learn about reading charts and improve your knowledge, so I bring you an easy and basic explanation of what the RSI is.
The Relative Strength Index (RSI) is an indicator that measures the acceleration of an asset's price movement and can help identify entry and exit points, trend reversals, and confirm the strength of a trend.
To understand the RSI, you need to know that it ranges from 0 to 100 and that a midline of 50 can be added. The interpretation of the RSI is as follows:
Oversold: When the RSI is below 30, the asset is undervalued and it may be a good time to buy.
Overbought: When the RSI is above 70, the asset is overvalued and it may be a good time to sell.
Balance: When the RSI is between 30 and 70, it may be a transition period.
Additionally, the RSI can be used to identify divergences, i.e. when the price and the RSI are moving in opposite directions. For example, a bullish divergence occurs when the price makes new lows, but the RSI is rising.
The RSI is calculated by comparing the current performance of an asset with its previous performance. The standard number of periods for the calculation is 14, but 9 and 28 are also commonly used.
It is important to remember that the RSI should not be the only indicator used to analyze an asset.
The Relative Strength Index (RSI) is an indicator that measures the acceleration of an asset's price movement and can help identify entry and exit points, trend reversals, and confirm the strength of a trend.
To understand the RSI, you need to know that it ranges from 0 to 100 and that a midline of 50 can be added. The interpretation of the RSI is as follows:
Oversold: When the RSI is below 30, the asset is undervalued and it may be a good time to buy.
Overbought: When the RSI is above 70, the asset is overvalued and it may be a good time to sell.
Balance: When the RSI is between 30 and 70, it may be a transition period.
Additionally, the RSI can be used to identify divergences, i.e. when the price and the RSI are moving in opposite directions. For example, a bullish divergence occurs when the price makes new lows, but the RSI is rising.
The RSI is calculated by comparing the current performance of an asset with its previous performance. The standard number of periods for the calculation is 14, but 9 and 28 are also commonly used.
It is important to remember that the RSI should not be the only indicator used to analyze an asset.
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content. See T&Cs.
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