RSI trading strategy
RSI is a popular and widely used indicator.
RSI is a price following oscillator, and as the name indicates, it measures the relative strength of the stock.
RSI trading strategy is one of my favorite strategy.
RSI oscillates between 0 and 100 levels.
Its importanyt levels arev 70, 60, 50 ,40 , 30.
40 day RSI is a popular one; it will mainly check momentum and over-sold over-bought range.
One important thing to remember in the rsi trading strategy, ranging market is different, and the trending market is different.
So, before analyzing the chart based on RSI, first, we must clarify the trend in place whether the market is in range or not; if we make a mistake in doing this, we will not be able to apply that particular indicator.
RSI trading strategy is used to know over-bought and over-sold levels in the long-term or trending market.
When RSI is above 70 levels, the stock is considered overbought.
When RSI is below 30 levels, the stock is considered oversold.
RSI trading strategy tells us whether the stock is trending up or trending down.
When RSI remains above 50, the stock shows an overall bullish trend, and when rsi remains below 50, the scrip is in the bearish trend.
RSI trading strategy helps us take early entry and exit by showing the divergence signal between RSI and price.
When RSI falls below 30 levels and gives a positive breakout above 30, one can initiate a buying position.
When RSI breaks below 70, after retracing from above 70 levels, one should exit from the trade.
RSI is used to know momentum; though not primarily designed for it, RSI can indicate an increased rate in the trending market for remaining above and below certain levels in a more extended period.
In a ranging market, when RSI goes below 30 and takes support at 30, it allows buying, but in a trending market, one must not make a mistake to buy at bottoms because RSI may remain below 30 for an extended period.
In this situation, we do not get an exit on raising the price, and we will get stuck in a position for a long time.
We must never buy or sell based on the illusion that the stock is available at a low price.
When RSI remains below 30, bottoms had formed at a lot lower level than our expectation.
Now we will take an example and understand how rsi trading strategy will help us in trading.
Early chart of nifty, and there are many uptrends and downtrends.
RSI is in the oversold range, and it was above 30 levels; now it crosses above 50 levels; this is a confirmation signal, we will buy when RSI crosses above 50 levels.
RSI is gone through the overbought range, which means below 70 is the over-bought zone, and below 30 is the oversold range.
When RSI crosses the 70 levels, then we should exit from our buying position.
In a ranging market, when RSI crosses 70 or faces resistance near 70 or 60, we can sell, or when RSI crosses down 30 or takes support near 30 or 40, we can buy, but in trending markets, when RSI crosses above 70, the momentum towards bullish side is strong, and a sharp up move can happen.
RSI doesn’t go below 70 and faces resistance from 70 again, and we can keep long.
My advice is that if RSI crosses above 30, we should wait for the confirmation signal of RSI to cross above 50.
If the price is facing resistance at the 70 level many times, we can sell the stock when it reaches up to the 70 levels.
When RSI is going oversold range, there it is facing support many times, we can buy that stock at the support level.
Whenever we get resistance at 70, we can sell, and every time we get support at 30, we can buy; this was the scenario when the market is in a sideways trend.
When the market is in trending mode when RSI is in the overbought range, we do not make any short sell position because the market is in a bullish way.
By using RSI as an indicator, we may not be able to get accurate trade at every time.
I personally add these two indicators, along with RSI to achieve the accurate trade.
- Moving average
- Bollinger Band
How To Trade In Stock Intraday With The Help Of Bollinger band : RSI trading strategy
Bollinger band will give the early signal, whether the market is moving towards the bullish side or bearish side.
If the Bollinger band is in a narrow position, that means contracting, and the signal is that market is in consolidation mode, so do not enter any trade while the market is in consolidation mode; wait for the scrip for picking movement.
The signal of whether the market is picking movement is, our indicator Bollinger band will expand, or it will show some expansion moment.
You can enter the trade after the expansion of the Bollinger band.
Remember Bollinger band will show whether the market is in bullish mode, consolidation mode, or bearish mode.
When the 5-minute candle has opened outside the Bollinger band, that trade will not be much effective.
Trade will be effective when the candle stays on the inner side of the Bollinger band.
I will trade when the candle is on the inner side of the Bollinger band.
I will avoid trading when the candle opens outside the Bollinger band.
How To Trade In Stock Intraday With The Help Of Moving Average: RSI trading strategy
Trading by using the moving average will be accurate
Enter the long trade, when a cross-over of moving average takes place towards the bullish side.
And your stop loss should be the day low.
And your target would be according to your risk-reward ratio.
Enter the short trade when a cross-over of moving average takes place towards the bearish side.
And your stop loss should be the day high.
And your target would be according to your risk-reward ratio.
I suggest the 5 minute time frame for the intraday traders.
Remember one thing rsi trading strategy will work more effectively on the combination of moving average, RSI and Bollinger band.
All the above cases discussed are all probabilities; there are no sure shot points in the stock market.
I may confidently say that if you follow the above rules, you can get the most accurate trade on RSI trading strategy.
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