How to use the RSI indicator in trading
How to use the RSI indicator in trading
The RSI indicator is considered one of the most popular tools in trading, making it essential for beginner traders to learn how it works.
RSI is supported by almost all trading platforms by default. When added, it appears in a separate window below the main price chart.
What is the RSI indicator?
The RSI (Relative Strength Index) indicator for financial markets was introduced by J. Welles Wilder Jr. in his book New Concepts in Technical Trading Systems. The RSI identifies overbought and oversold areas. Although the book was published in 1978, the indicator remains relevant even half a century later.
Benefits of the RSI indicator:
- Applicable to all markets and timeframes.
- Available on almost all trading platforms.
- Easy to configure.
- Can be used as a standalone tool or in combination with other indicators.
Drawbacks of the RSI indicator:
- Generates many false signals, especially against the trend.
- Does not consider fundamental data or trading volume/
The article offers recommendations for configuring the RSI indicator for both day trading and swing trading. It also introduces the top three strategies based on RSI readings.
To avoid mistakes when trading with the RSI indicator, familiarize yourself with the most common errors.
For more detailed instructions on using the RSI, explore our comprehensive guide.
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