Steemit Crypto Academy – Season 2 - Week 4 - Post for @kouba01

Hello awesome people, how is everyone doing today, it is weekend again, the atmosphere is filled with fun and excitements. Everyone loves weekend as it is one of the best days of the week as we prepare and expect more awesome things to come in the coming week. This week’s topic is about Relative Strength Index – RSI.

Relative Strength Index - RSI

When it comes to indicators, the Relative Strength Index – RSI is one of the most popular types of indicators that is used by a lot of cryptocurrency traders. Relative Strength Index – RSI is basically an indicator that is used by a lot of cryptocurrency traders to measure a cryptocurrency momentum which is basically the speed and size of price changes. In order words, it is a tool for technical analysis or an indicator that cryptocurrency traders use to measure the degree of recent price changes of a cryptocurrency asset.
Relative Strength Index RSI is calculated with the following
Relative Strength Index or RSI for short is solved with the following 100 – 100 / ( 1 + RS )
RS which is the Relative Strength = Average gains / Average losses in the last N price bars
N = the period of RSI
With this formular RSI can be calculated

When it comes to indicators that are useful and can be trusted, RSI is definitely one of them. Relative Strength Index RSI can be trusted when it comes to crypto trading it continues to prove to be a reliable indicator for stop loss order. One of the main uses of RSI is that is it provides both early and false signals which is great benefit for cryptocurrency traders. The ultimate goal of every cryptocurrency trader is to maximize profit, so the RSI is a great and trusted tool that can help traders achieve their targets.

Configuring the RSI indicator on the chart

Configuring RSI is quite an easy and straight forward process with the help of tradingview which is an amazing tool for technical analysis. To do this…

• Visit https://www.tradingview.com and set up your account
• Next, Select the cryptocurrency pair of your choice

• Click on the indicators tab

• Search for RSI in the search bar
• Select the Relative Strength Index indicator

• You will now see the RSI indicator on the chart

• For the RSI indicator settings, click on the setting icon

• From the setting screen, you can configure the settings of the RSI indicator

The number of days that is taken into consideration is the length parameter and it is utilized by the indicator to analyze its avg value. By default, this value is set to 14 simply because the RSI captures just 17 days or 2 weeks. However, this value can be modified as well. The main reason why the RSI is set to 14 days by default is because it gives a clear vision of the market price changes or volatility of the market. As I mentioned above, this value can be changed at will.

How to interpret the overbought and oversold signals

In the world of cryptocurrency, overbought is basically a situation in the market where there is a high demand for a particular cryptocurrency. In other words FOMO, a lot of people are buying the coin which causes the price to go up. While in oversold, it means that there is a massive dump in the market as a lot of people are selling the cryptocurrency. This can be as a result of a negative news that causes FUD. When the market experiences overbought, there is a high chance that a correction in price will follow. Also, when there is an oversold, there is a high chance that the price will bounce back up which is a good time to buy. Looking at the RSI indicator, you can clearly see the spikes which indicates overbought signal, and the opposite represents an oversold.

How do we filter RSI signals

While RSI indicator signal is great, it is important to know that there is a possibility of false signal like in every other indicator. To filter RSI signals in order to recognize true signals from false signals is by making use of other indicators like higher highs, lower lows indicators and also supertrend indicators. That way, it is easier to identify if the signal is true or false.

Review the chart of any pair - DOT/USDT

The RSI indicator on the DOT/USDT chart shows the various areas and times where DOT is overbought and oversold on the USDT pair.

Conclusion

Relative Strength Index RSI has proven to be a very powerful indicator tool that offers a lot of benefits to cryptocurrency traders. The indicator gives a lot of insight concerning the state of the market and can great help cryptocurrency traders make a lot of profits.

@kouba01