Quickstart Guide to RSI for Crypto Trading
Cryptocurrency trading is exciting. With the possibility of incredible gains and new growth every day, trading can feel like an adventure with hundreds of new opportunities every day.
While trading can sometimes seem like guesswork, there are some helpful tools that can assist in making predictions and indicating possibly profitable routes. One such tool for cryptocurrency trading is the Relative Strength Index.
Relative Strength Index
The Relative Strength Index, or RSI, is a technical analysis tool used to measure change and speed of price movements on a trading exchange. It essentially helps you predict when currencies are overbought or oversold.
The RSI is measured on a scale of 1 to 100, and is calculated by the following formula:
If the RSI is under 30, that indicates that the currency is probably being oversold, and if the RSI is over 70, it’s probably being overbought. This indications are useful because it helps you predict trend reversals. If a coin’s RSI dips below 30 on the RSI, that might be a good time to buy a coin because the price could soon be rising. On the other hand, if a coin’s RSI moves above 70, you might want to sell your currency and get the most on your crypto investment before the value goes back down again.
The RSI numbers are just indicators, and while they are helpful in making predictions, they aren’t a perfect forecast. It doesn’t necessarily mean that you should buy or sell if the currency is traded in frequencies below 30 or above 70. In fact, some people adjust the overbuy/oversell threshold to 80 and 20 to avoid misreading market trends.
This is an image of an RSI chart found on Cryptocompare.
The RSI chart is located at the bottom of the image. Here, you can see a red dotted line at 70 (overbought line), and a green dotted line at 30 (oversold line), and red and green arrows indicating where currencies rose or fell below the lines. Often, whenever the RSI crosses the overbuy or oversell lines, the trend often reverses and the coin rises or falls in value.
Neuryx Club
Cryptocurrency investment is an exciting world of opportunity, growth, and potential, and represents the future. Entering the cryptosphere is as much about learning as it is investing, and the important thing is not to invest more, but to invest smarter.
Neuryx Club is an AI-powered crypto trading assistant that offers exclusive analytics and advanced trading tools to help you stay on top of your crypto game and trade smarter.
