RSI, or Relative Strength Index, is one of those indicators that might help you catch the trend as it sends you signals of whether the market is oversold or overbought. If the asset is oversold, it means that it has traded lower in price and has the potential for a price bounce. The situation represents a good buying opportunity for long-term investors betting against the bearish trend. But it is also a great fit for swing trading.
Traditionally, while using RSI, traders set up the values of 30 and 70 to spot oversold or overbought signals. But the settings could be different depending on your approach. Take a look at the chart above, and you will spot the signals based on the settings of 30 and 70.
In this case the asset is oversold when its value falls below 30. And vice versa, the asset is considered overbought, when its value rises above 70. On the pic, it’s not difficult to spot those signals as they are outside the lila range.
RSI Indicator works on a 5-minute timeframe and searches for entries when the value crosses above 75 or below 25 as shown in the screenshot
Read more about RSI in our Blog