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Trading on Cryptocurrency Bitcoin Etherium with RSI

The RSI was developed by J. Welles Wilder as the Relative Strength Index (RSI). It is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Nowadays it is commonly used to measure trends.

The RSI is an extremely popular momentum indicator that has been featured in a number of articles, interviews, and books over the years. To simplify the calculation explanation, RSI has been broken down into its basic components: RS, Average Gain and Average Loss. This RSI calculation is based on 14 periods, which is the default suggested by Wilder in his books. Losses are expressed as positive values, not negative values, which often misleads inexperienced users.

 

The first calculations for average gain and average loss are 14-period averages.

  • First Average Gain = Sum of Gains over the past 14 periods / 14.
  • First Average Loss = Sum of Losses over the past 14 periods / 14

The second, and subsequent, calculations are based on prior averages and current gain losses:

  • Average Gain = [(previous Average Gain) x 13 + current Gain] / 14
  • Average Loss = [(previous Average Loss) x 13 + current Loss] / 14

Taking the prior value plus the current value is a smoothing technique similar to that used in calculating an exponential moving average. This also means that RSI values become more accurate as the calculation period extends. To exactly replicate some RSI numbers, a formula will need at least 250 data points. All of these calculations are done by complicated programs and algorithms as a human would take days to make one chart calculation.

Wilder’s formula normalizes RS and turns it into an oscillator that fluctuates between zero and 100. In fact, a plot of RS looks exactly the same as a plot of RSI. The normalization step makes it easier to identify extremes because RSI is range bound. RSI is 0 when the Average Gain equals zero. Assuming a 14-period RSI, a zero RSI value means prices moved lower all 14 periods. There were no gains to measure. RSI is 100 when the Average Loss equals zero. This means prices moved higher all 14 periods. There were no losses to measure.

Many users of the RSI falsely assume that one should buy stocks with the highest relative strength. The key to using the relative strength index formula is finding stocks standing out of the range with relative strength compared to the main indices. The time to sell a stock is when it has advanced significantly out of the base curve.

 

There are many effective strategies for trading using the RSI. Although it is an effective tool, it is best to combine the RSI with other indicators to verify and validate decisions made for trading. The following are some of the most popular trading strategies by level of their effectiveness.

 

The RSI is a momentum indicator.

RSI fluctuates between 0 and 100 providing overbought and oversold signals.

Readings above 70 are considered bullish.

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Readings below 30 are considered bearish.

The default RSI formula is calculated based on:

  • Gains over the last 13 periods
  • Current gain
  • Average loss over the last 13 periods
  • Current loss
  • Stop loss orders are recommended when trading with the RSI.

RSI should be combined with other trading tools for better signal interpretation.

Some of the successful RSI trading strategies are:

  • RSI + MACD
  • RSI + MA Cross
  • RSI + RVI
  • RSI + Price Action
  • RSI + RVI are the better team when trading intraday.

The RSI is one of the most popular trading tools and as such is commonly employed when trading cryptocurrencies. As with any asset that can be traded on an exchange, cryptos are subject to various levels of volatility. However, given the fact that cryptos are no subject to the same factors that influence the exchange rates of other assets, multiple other AI and machine learning tools must be used in conjunction with aggregators to properly assess the trading value of cryptocurrencies and have some measure of insight into their trading potential and rates.

 

Though the crypto market is still relatively new and lacks many of the traditional institutions of a civilized market, there are projects on the market that seek to indemnify or mitigate the associated risks that investors take when deciding to invest in projects. Cryptics is one such project that seeks to offer the necessary instruments for alleviating the situation with uncertainty. The concept behind it is to support market participants by providing liquidity on exchanges and a safety cushion for retail investors by creating a platform that connects market players and develops algorithms to predict changes in the value of cryptocurrencies. Such instruments based on highly advanced scoring models involving machine learning and AI are incomparable with human intuition that even the luckiest and most prudent investors could ever be endowed with. The multitude of factors

that influence the exchange rates of other assets, multiple other AI and machine learning tools must be used in conjunction with aggregators to properly assess the trading value of cryptocurrencies and have some measure of insight into their trading potential and rates.

 

Though the crypto market is still relatively new and lacks many of the traditional institutions of a civilized market, there are projects on the market that seek to indemnify or mitigate the associated risks that investors take when deciding to invest in projects. Cryptics is one such project that seeks to offer the necessary instruments for alleviating the situation with uncertainty. The concept behind it is to support market participants by providing liquidity on exchanges and a safety cushion for retail investors by creating a platform that connects market players and develops algorithms to predict changes in the value of cryptocurrencies. Such instruments based on highly advanced scoring models involving machine learning and AI are incomparable with human intuition that even the luckiest and most prudent investors could ever be endowed with. The multitude of factors involved in predicting a cryptocurrency’s rise or fall are all taken into account by the algorithms that Cryptics employs. Investors should consult such projects as the expense is well worth the ensured profit and peace of mind.

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