RSI Trading Tool Minimizes The Work of Traders In Crypto Market
Trading is a risky activity. But yet people show interest because if done right, you can earn more money beyond imagination. Online assets are to be bought, and some or all of them are sold whenever the price goes above the buying price. Take the example of cryptocurrencies, today’s value may remain constant or increase or decrease for tomorrow.
To generate money, users must trade on multiple assets. Focusing on every asset all the time is difficult. The primary task to focus on is the users should get notified whenever the price of an owned asset increases or decreases. A graph representing the history of its pricing changes would be very helpful. This plays a crucial role in deciding to buy more or sell it to avoid further loss.
A Brief About RSI
Full form of RSI is Relative Strength Index. This is one of the most widely used technical trading tools by many users. As said above, the main point here is to identify when asset value increases or decreases crossing the default value.
RSI is helpful in achieving the above statement. Traders who use RSI will be a step above than traders who follow other tools and techniques.
RSI calculates the result based on the formula, and it is as follows:
RSI = 100 – 100/ (1+RS)
RS = Average of X periods close up / Average of Y periods close down
After calculation, the formula returns the value between 0 and 100. If the value is below 30, then that particular asset is considered to be oversold. If the value is above 70, then the asset is considered to be overbought.
How Is RSI Useful?
Now we are clear how RSI calculates and gives the result about the value of the asset. Suppose, if your owned asset is “overbought”, this is the time when the asset’s value increases. As the user gets notified, he/she can sell the assets for earning profits.
If the asset comes under “oversold”, its value goes down in the market. This doesn’t mean that it is all over. The more down an asset’s value goes, the higher it increases again.
Relative Strength Index is indeed a game changer tool for traders. They have to use it well to gain maximum profits out of the statistics produced by the RSI tool. It’s been 40 years that the formula is entered into the market and is proven to work in most of the cases.