Hey hey: what's up my friends, so in today's episode right i want to talk about the rsi indicator and how you can use them and you know improve your trading results, so it's kind of like an rsi indicator cheat sheet. So, first and foremost, what is the rsi indicator? Rsi stands for relative strength index. This indicator is developed by j, walder jr and it's a momentum indicator and the values of the rsi indicator. You know oscillates between 0 and 100, so it cannot can never go below zero and it can never go above 100 and the g is right.

The main concept behind the rsi indicator is that it's a momentum indicator so, in other words, it measures how fast the price moves. So the faster the price moves up higher the greater the rsi value will be the faster the price drop, the great the lower the rsi value will be, and if the price you know goes up very slowly like you know it chops really up down up down. Slowly, the rsi indicator will be you know, kind of like in the middle. You know 50.

55. 60. Pretty much. You know inching it's way high up higher.

So as you can see the rsi indicator. The main concept that i wanted to take away is that it's a measure of momentum, it measures how quickly the price goes up or how quickly the price goes down, and that's how your rsi can fluctuate between you know 20, 30 and go all the way up To 1780, or even 90 right when there's, especially when there's strong momentum in the market, so with this in mind, okay, the rsi indicator also has a uh the levels between 0 and 100. But what's significant is the levels between 30 and 70 because traditionally right when rsi reaches the level 30 it's considered over so and when the rsi indicator crosses above 70, it's considered overbought, but here's the thing right. Remember.

I just shared with you that the rsi is a momentum indicator. It measures how quickly the price moves. So if the rsi indicator is below 30, let's say the 14 period rsi is below 30. What it's telling you is that over the last 14 days right, the price has has dropped a lot in the market right, strong, bearish momentum, and it's oversold in the sense that yes right there is this strong market decline.

But it does not mean that the market will make a rebound, doesn't mean that it's oversold it will definitely go up higher. So this is a mistake that many traders make they think that, just because the rsi indicator is oversold, it means it's time to buy, just because the rsi indicator is overbought. It's time to short, no, what the indicator is telling you is that there is strong momentum in the market if it's overbought, it's telling you that there is strong bullish momentum and if it's oversold, it's telling you that there is strong bearish momentum. That's the key thing right: it doesn't mean that oversold buy overbought, i mean oversold, buy overbought shop, no, doesn't work.

That way. So don't make this mistake that you know i've seen many traders you know make right, because they think oversold, you know is you know, buy overbought itself, no, not like this. Okay. So, there's a mistake that uh please avoid second thing right: the rsi indicator right as a as mentioned previously, it measures momentum and the way it measures.

Momentum is by calculating, like its average, gain relative to average loss. So long story short right. What you can do with the rsi indicator is to set it to, or rather to use it as a trend filter to trade in the direction of the trade. So what you can do is you set your rsi settings to 200 period settings so what it's going to do for this 200 period settings is that the rsi indicator will look through the last 200 candles right and it measures the average gains to average loss over The last 200 candles, so you can imagine that if the rsi indicator - or rather, if the if over the last 200 candles right, the average gains, is more than the average loss.

You can imagine that the rsi indicator will be above 50 because there's more gain than loss. Likewise, if over the last 200 candles, the average loss is greater than the average gain, then your rsi indicator is will be below 50., so it's like it can be used. Like a long-term trend filter, so the gist of this is that you can use the 200 period rsi and if the price, or rather if the rsi indicator, is above 50, you can conclude that this is a long term uptrend and you can look for buying opportunities And if the rsi indicator, if the 200 period rsi indicator is below 50., you can conclude that this is a long-term downtrend and you look for selling opportunities. Now, when i use the word long-term right, it's relative to the timeframe you're looking at because on a five-minute timeframe, if you have 200 candles, it will be a long-term downtrend on the five-minute timeframe.

If you do this on a daily timeframe, it will be a long term downtrend or uptrend on the daily time frame. So this one the whether the trend is uh when i say long term right, it's relative to the time frame that you are on. Okay, better than mine - and the third thing i want to share with you - is: how do you actually use the rsi indicator to better time your entry, so as discussed right, the rsi indicator? It measures momentum in the market, so let's say rsi dips below 30 right and then it slowly, you know, starts to turn and cross back above 30.. What does this rsi indicate? The cross right from below 30 back to above 30 tells you well.

It tells you that you know over the recent few candles right there is buying pressure stepping in right and that led the rsi indicator to cross back up above 30.. So for those of you who are familiar with, you know, bullish reversal, candlestick patterns like hammer engulfing pattern, so the rsi indicator can be another way right to be used as an entry trigger if you're, if you're someone who doesn't want to go down the candlestick pattern Route so, for example, if let's say you are bullish in the market and all other conditions are met and you're looking for an entry trigger to get long, you can use the rsi indicator to help you time your entry, so one example could be. You know rsi indicator dip below 30, and then it crosses back above 30 that could be an entry trigger for you to get low. Okay, so so, in a way, is to give you an entry trigger a signal to get on board the trade.

After all, the other conditions are met right. So this is not a trading strategy in itself. It's only an entry trigger to trigger you to get into a trade. After all, the other market, or rather all the other requirements are met, and the requirement is pretty much determined by you right in your trading plan trading strategy.

Okay and finally, one last thing right: you can also use the rsi indicator to capture a swing. So what do i mean by capture a swing? So swing trading is a type of trading where you look to buy low, sell high. So imagine that market is in range between the support and resistance, so swing trading. You look to buy near support and sell at the highs of resistance, thereby just capturing this one swing over here that one move in the market, so rsi indicator can help you capture a swing in the market.

So, for example, let's say you got into a long trade, maybe through uh, a trading strategy or trading setup that you know got you into a long trade. So when you exit the trade right to capture a swing, what you can do is exit right when your rsi indicator crosses above 50, for example, because when the rsi indicator crosses above 50 right, it means that the market has moved up. One move higher and if you are a swing trader and just want to capture one swing in the market right, you can exit your trade when the rsi crosses above 50.. So these are a few techniques right.

You can consider right when you're using the rsi indicator. So hopefully, this uh that makes sense to you and with that said, let's do a quick recap. Number one remember: the rsi indicator is a momentum indicator. It measures, you know how fast the price moves.

Number two don't make the mistake. All right of you know buying, just because the rsi indicator is overbought or selling, just because it's oversold or shorting just because it's oversold number three, you can improve uh your winning rate with the rsi indicator by using it as a trend, filter use, adjusting it to A 200 period, rsi number four: you can use the rsi indicator to help you uh to serve as an entry trigger to get you on into a trade and number five. You can use the rsi indicator to help you capture a swing in the market, exiting when, for example, the rsi crosses above 50 or above 55. You know, however, you wish to define it okay, so with that's it.

I wish you good luck and good trading. I will talk to you soon. You.