RELATIVE STRENGTH INDEX
Hello traders, today I will explain you about one of the best indicator (RSI) which is used by many of the traders for both long and short term.
Q) What is RSI?
Ans) It is a strength index and is calculated according to the candle (green or red) momentum in the market. It is technical indicator and used by traders to know if there is a bullish or bearish movement in the stock and decide their entry or exit position.
Q) What setting to be change in RSI so that it is easier to read?
Ans) I prefer Trading View for chart analysis so I will tell according to that.
Go to setting of RSI then click on Style on the top of the box. You can see RSI UPPER BAND is 70 change it to 60 and RSI LOWER BAND is 30 change it to 40. Do not change anything in RSI MIDDLE BAND.
Q) How to read RSI lines?
Ans) You have to see only purple line which is most important and assume the yellow line as support and resistance. You can also see dotted line in front of 60, 50 and 40 assume it also at support and resistance. If the purple line is above 60 then market is strong bullish and if the line is below 40 then market is strong bearish. You can also use price action in RSI.
Q) During which time frame should we use RSI?
Ans) For day trading (in nifty and bank nifty) or intraday use 5 minutes and 15 minutes. For swing trading use 1 day. Avoid using this indicator in 1 minute’s time frame because it is not so accurate.
Q) When to wait even if the RSI given the signal to buy or to sell the stock?
Ans) When the market is becoming bullish the purple line of RSI is also going upward from down to up and the yellow line should come below the purple line of RSI and should also go upward from down to up with RSI. Same applied to when the market is bearish the purple line of RSI is also going downward from up to down and the yellow line should come above the purple line of RSI and should also go downward from up to down with RSI. If the RSI purple line is going up or going down and the yellow line is somewhat becoming straight and not following the upward or downward path with RSI do not enter the market without extra confirmation because it is a short bullish or bearish movement and can be sign of reversal.
Q) Sometimes there is a false Indication in RSI so how to make it more accurate?
Ans) But sometimes there is a false movement in RSI so do not only use it as the only indicator for the stock price. I suggest you to use the indicator ADX with EMA 20. By using this it will save you from false indication of RSI.
I WILL ALSO POST THE BLOGS ON OTHER INDICATORS
It is only for educational purpose which I have studied and test in the market. Any decision you take during the market is your own responsibility.