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    Relative Strength Index (RSI)

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    Shinchana K
    The document discusses the Relative Strength Index (RSI) indicator. RSI is a momentum indicator that shows overbought and oversold conditions and can confirm price movement and warn of potential reversals through divergences. It provides buy and sell signals when the RSI breaks above or below thresholds of 60 and 40 respectively while both price and RSI are rising or falling. Bullish and bearish divergences between price and RSI can also signal potential reversals. The document recommends using RSI on 5-minute and 15-minute timeframes to identify divergence patterns.

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    Relative Strength Index (RSI)

    Uploaded by

    Shinchana K
    164 views6 pages
    The document discusses the Relative Strength Index (RSI) indicator. RSI is a momentum indicator that shows overbought and oversold conditions and can confirm price movement and warn of potential reversals through divergences. It provides buy and sell signals when the RSI breaks above or below thresholds of 60 and 40 respectively while both price and RSI are rising or falling. Bullish and bearish divergences between price and RSI can also signal potential reversals. The document recommends using RSI on 5-minute and 15-minute timeframes to identify divergence patterns.

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    The document discusses the Relative Strength Index (RSI) indicator. RSI is a momentum indicator that shows overbought and oversold conditions and can confirm price movement and warn of potential reversals through divergences. It provides buy and sell signals when the RSI breaks above or below thresholds of 60 and 40 respectively while both price and RSI are rising or falling. Bullish and bearish divergences between price and RSI can also signal potential reversals. The document recommends using RSI on 5-minute and 15-minute timeframes to identify divergence patterns.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    164 views6 pages

    Relative Strength Index (RSI)

    Uploaded by

    Shinchana K
    The document discusses the Relative Strength Index (RSI) indicator. RSI is a momentum indicator that shows overbought and oversold conditions and can confirm price movement and warn of potential reversals through divergences. It provides buy and sell signals when the RSI breaks above or below thresholds of 60 and 40 respectively while both price and RSI are rising or falling. Bullish and bearish divergences between price and RSI can also signal potential reversals. The document recommends using RSI on 5-minute and 15-minute timeframes to identify divergence patterns.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 6

    Relative Strength Index (RSI)

    ➢ RELATIVE STRENGTH INDEX - RSI Indicator


    ➢ In its setting,
    • set Upper band - 60, the Lower band - 40
    • Rest all – Default
    ➢ RSI is a momentum indicator
    ➢ RSI is directly proportional to the price
    ➢ We will use RSI only for breakout entries
    ➢ We can use it in 5minutes & 15minutes timeframe
    ➢ RSI Falling = Momentum falling = Exhaustion
    ➢ You can take entry when the candle is about to close - last 10-15
    seconds
    ➢ Remember:
    • The price will always lead
    • Price is the leading indicator
    ➢ RSI DIVERGENCE
    • Bullish Divergence is spotted using connecting lows on the
    upward trendline on RSI
    • Bearish Divergence is spotted using connecting highs on the
    downward trendline on RSI
    When RSI is increasing but the price is not - BULLISH
    DIVERGENCE
    When RSI is falling but the price is not - BEARISH
    DIVERGENCE
    ➢ There are four types of divergence -
    • We will use only simple divergence - both bearish & bullish
    • Ignore both hidden divergences - price action will give better
    signals
    ➢ Always connect trendline connecting candle bodies, not wicks
    when using RSI Divergence.

    ➢ RSI Divergence video for revision

    Part 1: https://www.youtube.com/watch?v=vUAus3x-0mA

    Part 2: https://www.youtube.com/watch?v=qtvzG4TI3HU

    ❖ RELATIVE STRENGTH INDEX (RSI):


    ➢ Gives buy and sell signals
    ➢ Shows overbought and oversold conditions.
    ➢ Confirms price movement & warn of potential price reversals through
    divergences
    ➢ Time frame it should be used on - 15min & 5min
    ❖ HOW TO USE RSI?

    The Relative Strength Index (RSI) may give us a buy or sell signal as
    mentioned below:

    • When both price and the RSI are rising and the RSI breaks
    above the 60 levels, then it’s a Buy signal.
    • When both the price and the RSI are falling and the RSI breaks
    below the 40 levels, then it’s a Sell signal.

    RSI SETTINGS IN TRADINVIEW:

    ➢ Input –Default Setting


    ➢ Style ->
    • Upper Band – Change the value to 60
    • Lower Band - Change the value to 40
    ❖ RSI DIVERGENCE
    ➢ Bullish Divergence is spotted using connecting lows on the
    upward trendline on RSI
    ➢ Bearish Divergence is spotted using connecting highs on the
    downward trendline on RSI
    ➢ Use RSI DIVERGENCE on 5 minutes & 15 minutes chart
    timeframe

    • When RSI is increasing but the price is not - BULLISH


    DIVERGENCE
    • When RSI is falling but the price is not - BEARISH
    DIVERGENCE
    ❖ FAQ’s

    1. What is divergence?
    Divergence is when the price of an asset is moving in the opposite
    direction of a technical indicator, such as RSI.
    2. Where should we draw the line on RSI in Bullish divergence?
    We should draw the line from below indicating support in Bullish
    divergence.
    3. Where should we draw the line on RSI in Bearish divergence?
    We should draw the line from the top indicating resistance in Bearish
    divergence.
    4. What Time frame should we look at for RSI divergence?
    In intraday trading, we should look for RSI divergence in 5 minutes
    and 15 minutes Time frame only. Bigger time frame divergence
    works very slow.
    5. Which divergence works better? 5 minutes or 15 minutes Time
    frame?
    15 minutes RSI divergence will have higher chances of working than
    5 minutes RSI divergence as it is a bigger time frame and it can give
    bigger moves.
    6. What should we consider while drawing trendlines when
    spotting RSI Divergences? Body or Wicks of the candle?
    We must always connect body of the candles in such cases.

    Send us all your questions at


    support@boomingbulls.com

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