Relative Strength Index Bitcoin Analysis & RSI Bitcoin Trade Signals
Developed by J. Welles Wilder, explained in the book "New Concepts in Technical Systems".
RSI is the most popular indicator & it is a momentum oscillator and a bitcoin trend following indicator. RSI compares a bitcoin price magnitude of the recent bitcoin price gains against its magnitude of the recent losses bitcoin price losses and draws this data on a scale of values which ranges between 0-100.
RSI measures the momentum of bitcoin crypto; values above 50 signify bullish momentum while values below 50 center-line signify bearish momentum.
- RSI is drawn as a green line
- Horizontal dashed lines are plotted to identifying over bought & oversold levels are i.e. 70/30 levels respectively.
Bitcoin Analysis & Generating Trading Signals
There are several techniques used to trade, these are:
50-level Cross over Signals
- Buy signal - when the indicator crosses above the 50 a buy/bullish signal is given.
- Sell Bitcoin Signal - when the indicator crosses below 50 a sell/bearish signal is given.
RSI Bitcoin Patterns
Traders can draw bitcoin trend lines & map out chart patterns on the RSI indicator. The RSI commonly forms cryptocurrency patterns such as head & shoulders cryptocurrency pattern which might not have formed clearly on the bitcoin price chart.
Bitcoin Support/Resistance Break outs
RSI is a leading indicator & can be used to predict Support/Resistance Breakouts before bitcoin price breaks its support/resistance level. RSI uses the swing failure signal to predict when bitcoin price is about to break resistance and support zones.
Swing Failure - Support and Resistance Breakout
Overbought/Oversold Conditions on Technical Indicator
- Overbought- levels above 80
- Oversold- levels below 20
These levels can be used to generate bitcoin signals such as when RSI turns up from below 20 after oversold, buy and sell when RSI crosses to below 80 after overbought, sell. These signals are not suitable for Bitcoin because they are prone to a lot of whipsaws.
Divergence Bitcoin Trade Setups
Divergence trading is one of the technical analysis method used to trade reversals of the bitcoin price trends. There are 4 types of divergences that can be traded with this trading indicator covered in the divergence guide on this website.
