RSI (relative strength index) with cryptocurrency trade: best practice
The world of cryptocurrency trade is a high risk of a high representative. With the increase in decentralized finances (Defi), blockchain technology and cryptocurrency markets, retailers are constantly looking for new strategies to get an advantage. Among the various technical indicators used in the trade in trading with cryptocurrency is one that is highly effective, the relative strength index (RSI). In this article, we will examine how RSI can be used in trade cryptocurrency, including the best procedures.
What is the relative strength index (RSI)?
The relative strength index (RSI) is an impulse indicator, which of J. Welles Wildes Jr. RSI calculates two basic values:
- rs (relative strength): ratio of the price change to the price range.
- RSI : The number from 0 to 100, which shows how many standard deviations from their average value are the current price.
RSI is calculated using the following formula:
Rsi = (100 – average r) / average RS
The average RS is the average for the last N periods.
How to use RSI trade cryptocurrency: best practice
The use of RSI in commercial cryptocurrency offers several advantages, including:
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- Divergent detection : Using RSI with other indicators (e.g. Bollinger ligaments) can determine dealers the possible differences in price campaigns and market conditions.
Here are some of the best practices that must be taken into account using RSI trade cryptocurrency:
RSI parameter setting
Look at the following things when you set RSI parameters:
- Window size
: Determine how many periods should be used to calculate the average RS (e.g. 14 or 21).
- Period length : Select the length of the period that compensates for the accuracy and calculation performance.
- Overvalued/overvalued borders : Set specific overestimated and overestimated threshold values according to your trade strategy.
RSI level interpretation
RSI values are very important for determining the strength of the price movement:
* Overbook (70-100) : Dealers can consider taking the positions associated with risks, since the market is probably too much.
Resale (30-69) *: dealers should wait for retreat before the market is sold again.
RSIS use in trade strategies
RSI can be used in various trading strategies, such as B.:
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Best RSI usage practice
To use the use of RSI in cryptocurrency trading:
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- Combine with other indicators : Use RSI with other technical indicators (e.g. Bollinger gangs, MacD) to analyze more precisely.
Diploma
The relative strength index is a powerful tool that can be used in the commercial cryptocurrency to determine excessive or resale conditions and impulse changes.