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How to trade RSI Indicator and RSI Divergence

Relative Strength Index (RSI) is a momentum indicator that measures the magnitude of recent price changes to analyze overbought or oversold conditions.

An asset price is considered overbought (due for a correction) when RSI is above 70, and oversold (due for a rebound) when it is below 30. Some traders user more extreme levels (80/20) to reduce false readings.

Watching for RSI divergence between price and the RSI indicator is another way to use it.

RSI divergence signals tend to be more accurate on the longer time frames (min 1-hour charts). You get fewer false signals.

RSI Divergence can also be used as a confirmation of a breakout.

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