The attached image contains a summary of the strategy for using the Relative Strength Index (RSI) in trading:
RSI Indicator Cheat Sheet
1.Oversold
•RSI reading less than 30.
•The RSI indicator is showing at a very low level, indicating that the price may rise soon.
2.Overbought
•RSI reading above 70.
•The RSI indicator is showing at a very high level, indicating that the price may decline soon.
3.Bullish Signal
•When Divergence occurs:
•RSI makes a higher bottom.
•While the price makes a lower bottom.
•This is a buy signal (“Enter Long”).
4.Bearish Signal
•When Divergence occurs:
•RSI makes a lower high.
•While the price makes a higher high.
•This is a sell signal (“Enter Short”).
5.Trendline Breakout
•Bullish Signal:
•A break of the downtrend line on the RSI indicator indicates a buy trade entry.
•Bearish Signal:
• Breaking the uptrend line on the RSI indicator indicates a sell trade entry.
This summary expresses practical guidelines that can be used with the RSI indicator to make trading decisions based on overbought/oversold or divergences.
Or trend line breakouts.
