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Using RSI In Cryptocurrency Trading: Best Practices
RSI (Relative Forces Index) Using Cryptocurrencies Trading: Best Practice
The world of cryptocurrency trading is a high risk and a high reward game. With the increase in decentralized finances (Defi), Blockchain technology and cryptocurrency markets, traders are constantly looking for new strategies to gain an advantage. Among the various technical indicators used in the trade in cryptocurrencies, which is particularly effective, is an index of relative strength (RSI). In this article, we will examine how RSI can be used to trade cryptocurrencies, including the best practice.
What is the relative strength index (RSI)?
The relative resistance index (RSI) is an indicator of the acceleration created by J. Welles Wilder. It measures the extent of the latest price changes to determine excessive or monitoring conditions on the market. RSI calculates two basic values:
- RS (Relative Resistance): The ratio of price changes compared to price amplitude.
- RSI : The number from 0 to 100, which shows the number of standard deviations from the average value, is the current price.
RSI is calculated using the following formula:
RSI = (100 – Middle Rs) / Middle RS
where the middle RS is the average of the last period.
How to use RSI trade cryptocurrencies: the best practice
The use of RSI in cryptocurrencies offers several advantages, especially:
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Here are some of the best practices to consider when using RSI to sell cryptocurrencies:
RSI Settings Configuration
When configuring the RSI parameters, consider the following:
- Window Size : Set the number of periods used to calculate the average RS (for example, 14 or 21).
- Period Length : Select the length of the period that balances accuracy and calculation power.
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RSI level interpretation
RSI levels are very important to determine the strength of price changes:
* Overbook (70-100) : Traders may consider taking the risk as the market is likely to be exaggerated.
* resold (30-69) : traders should wait for the recession before they start their positions as the market is likely to occur.
RSI’s use in trade strategies
RSI can be used in various trading strategies such as:
- Other trend : RSI can be used to confirm trend direction and input / output levels.
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Best practice to use RSI
To maximize the use of RSI trade in cryptocurrencies:
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- Combine with other indicators : Use RSI with other technical indicators (such as Bollinger strips, Macd) to analyze in more detail.
Conclusion
The relative strength index is a powerful tool that can be used to trade cryptocurrencies to determine excessive or event conditions and changes in impulse.