[00:03] i'm revealing the best way to use the rsi indicator important that we can identify key levels on the market where prices
[00:16] are more likely to switch directions these key levels can be detected if we high or low price and the rsi does a very good job of doing that and in this video i'm revealing the best
[00:32] strategies that we can use with the rsi indicator before we if you have any suggestions for future videos or just questions about trading in general feel free to leave them in the comments below
[00:45] i'm still a small channel so i'll still have time to read and reply to all of so without further ado let's get on with the video so if you open the rsi indicator it displays a single line
[00:59] displays a single line and two points the 70 and the 30 point and two points the 70 and the 30 point if the rsi is above the 70 point meaning is considered overbought and if the rsi is below the 30 point
[01:12] meaning the market is considered oversold so a common misconception that so many traders make oversold the market will automatically reverse
[01:25] upwards and when the rsi hits overbought the market will automatically reverse downwards using the rsi indicator if you want to burn your money away
[01:39] because it simply does not work you see the flaw of the rsi indicator is overbought and oversold strategy with all market conditions if the market is on a strong trend the rsi will display so many false
[01:54] signals here's an example you can see that the price is clearly on an uptrend and the rsi indicator is at the overbought levels so if you took a cell position here
[02:07] hoping for a reversal let's see what happens the price instead pushes further to the upside and the rsi went to overbought levels so just because the price is overbought
[02:20] doesn't mean it's going to reverse down to oversold prices can stay at overbought and oversold levels for long periods of time so instead of making the rsi as your main indicator
[02:33] supporting indicator you want the rsi to further confirm your analysis and my favorite type of analysis when combining with the rsi indicator is just simple support resistance and
[02:47] trend lines for example an rsi that signals oversold levels alone can lead to false signals but if the rsi is at the oversold levels while being in a major support line it's a much more accurate signal
[03:03] a much more accurate signal so let's jump into a chart here you can see that the price is clearly on a downwards movement you can draw a trend line here as price is rejected multiple times
[03:15] below here a little tip when drawing support resistance line that i personally use is that prices needs to reject at least three times to further confirm that it's a strong support or resistance
[03:29] so now the price is back at the lower trend line after it rejected multiple times and we can also see a strong price rejection while the rsi is at the oversold levels
[03:42] opportunity so here's another example in this chart you can see a clear support line now as the price hits the support line and the rsi is at the oversold level the price reverses
[03:57] back up every time we can actually see this happening two times already the price hits and reverse hits and reverse now we can see the pattern starts forming again the price is at the support line
[04:11] and the rsi is at oversold signaling that the price will likely reverse to so this is also a good buying opportunity here [Music] another way to utilize the rsi indicator
[04:26] another way to utilize the rsi indicator is with divergences a divergence is when the price of an asset is moving in the opposite direction of the rsi for example normally when the price of a
[04:38] stock is forming higher highs the rsi will also form higher highs and if it's forming lower lows the rsi will also form lower lows forming higher highs but the rsi forms lower lows instead so
[04:56] this is called a divergence and i understand that finding a divergence with a naked eye is very hard that is why i use an indicator on training view called crs so this indicator will help you a lot
[05:10] happens this will make your job 10 times easier there are two types of divergences a bullish and a bearish divergence so a bullish divergence
[05:24] but the rsi is forming higher highs instead this signals that the price is going to reverse to the bullish side opposite when the price is forming higher highs
[05:41] does not agree with the direction of the price and instead forms lower lows this signals that the price is going to reverse to the bearish side so just like when using the rsi
[05:55] you cannot just buy or sell if a divergence happened case i'm also using support resistance and trend lines for my second confirmation so let's jump
[06:09] into a chart as we can see shopify was heading on a while the price rejects this key level of resistance multiple times so we can put a trendline here
[06:21] divergence followed by a big green candle that broke out of the trend line so this will be a good buy opportunity
[06:34] so let's look at another example you can see that the price is on a clear here as it rejects multiple support levels you see a bearish divergence forming as rsi
[06:49] is displaying lower lows yet prices are heading towards higher highs next you can see that the price broke out of the trend line out of the trend line and a huge bearish candle was formed
[07:01] and a huge bearish candle was formed so this is a good sell opportunity another way of utilizing the rsi is by using the 50 point line 70 and 30. so you actually want to change
[07:18] this into 50 and just disable the other ones so now we have a middle line in the rsi so in this strategy we are actually using the rsi for a trend indicator instead of a reversal indicator
[07:34] how this works is that if the rsi crosses above the 50 point line it means that it's a bullish signal [Music] and if the rsi crosses below the 50 point line
[07:46] it means that it's a bearish signal but again we would also need a second confirmation indicator to further support our analysis in this i'm combining it with the stochastics indicator
[08:00] indicator so let's jump into the examples here the 50 point line while the stochastics is at the oversold levels so this is a good opportunity to buy
[08:14] so let's look at a few more examples here the rsi crosses below the 50 point line and the stochastics and the stochastics is at the overbought levels so this is a
[08:26] good opportunity to sell as the price reverses strategies that you can use with the rsi indicator that you can implement right now and i would like to ask a very small
[08:41] to the channel it literally takes only two clicks but it means a lot to me so thank you guys for watching and i'll so thank you guys for watching and i'll see you in the next video