Relative strength index is an oscillator indicator.
Being an oscillator indicator,Relative Strength Index was developed by J.Welles Wilder with the main objective of helping traders to know of an overbought or oversold market condition. According to J.Welles Wilder,Relative strength index is used to measure the speed and change of price movements.Relative strength index ranges between 0 and 100. Relative strength index is based on overbought and oversold condition. For overbought condition,the RSI rises above 70 while for oversold condition the RSI falls below 30.
RSI has a time default of 14 period.
RSI is calculated using the following formulae;
RSI= 100 - 100
RS= Average Gain/ Average Loss
Oversold CRYPTOCURRENCY Market FOR RSI
For oversold market, the Relative strength Index will fall below 30.This will signal the cryptocurrency trader to buy certain amount of a given cryptocurrency in terms of USDT if they want to grow the USDT account or in terms of bitcoin if they want to grow their bitcoin account. The cryptocurrency trader will then hold the amount of cryptocurrency bought until its price rises above the previous price which they will have purchased at .Here is how it looks like;
From the candlesticks chart above,there are two points,point A and point B. Point A represents the RSI while point B represents the oversold point.At point B,the RSI has fallen below 30 thus an indication of an oversold point over there. This will signal the TRX trader to place a buy order of a certain amount of TRX. The trader can either decide to use market order or limit order.For market order,their order will instantly be initiated thus they receive the amount of TRX they purchased to their account.As you can see,the market has started to move upwards. Their account in terms of USDT will start increasing in value
Overbought cryptocurrency market for RSI
For overbought market, the Relative Strength index will rise above 70. This will signal the cryptocurrency trader of an overbought market condition.This will signal the TRX trader to sell the amount of TRX which he had previously purchased and was holding in order to avoid making his account to start declining in value in terms of USDT. This is indicated as from the candlesticks chart below;
The candlesticks chart above represents the market for TRX against USDT.
From the candle sticks chart above, there are two points,point A and point B. Point A is the RSI while point B represents the overbought market condition. At point b,the RSI has risen above 70 thus an indication of an overbought market condition. This signals the TRX trader to sell the amount of TRX which he had previously purchased and was holding to avoid causing a decline in value of his account in terms of USDT. The TRX trader can either decide place a sell market order whose transaction will be initiated instantly or a sell limit order whose transaction will be initiated upon reaching the limit order price
Recommendation: Cryptocurrency market is highly volatile. When you place a buy order, make sure to apply risk management to be safer incase your buy order goes against you.
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