GUIDE TO USING RSI FOR CRYPTOCURRENCY



what's up YouTube my name is Danny and thank you for tuning back into crypto 99 now in this video I want to talk about an indicator that I use relatively frequently and no pun intended which is called the relative strength index or RSI you may see it at the bottom of a lot of my charts it's the one I talked about with the blue block or the purple block and the purple line moving in and out and I want to talk about two key ways you can use RSI in your portfolio whether you day trade or not doesn't particularly matter because this information can be utilized in the swing trade long term Hodel positions of realizing entries it can be used a ton different ways and the information is extremely important if you want to further your education from as a trader whether you're a very beginning trader or a novice trader or a more experienced trader it's good to have this information at the ready so I want to go over the market briefly first the markets about in the same spot we were at yesterday hovering around that four hundred and eighty billion dollar mark one thing I don't like is the 24-hour volume has been sucked back down to that just over twenty billion dollar level which is under that five percent not necessarily danger zone but I think it's a lot healthier when it's in that six really needs to be seven eight nine percent mark that's a healthy market with a lot of market activity and I like that a lot better there's twenty billion dollars under that five percent worries me a little bit I don't think we're gonna go back to the lows that we experienced you know week week and a half ago but I'm not real fond of that number I really would like that to go up a little higher but no really big movers in the last 24 hours except for my favorite coin on the planet not try and I beat the I use that beaten up Tron but trods up 9b cash is up almost ten sorry Roger verrico to be cash hope you don't kill me and litecoin is up just a little bit over five those are really the only significant movers in the market everything else is up you know in that one to two or down one to two percent range from a straight kana hovering around trying to find its base but I don't to spend too much time with the market I want to spend a little more time on RSI what is RSI how can we use it and I'm going to pull up a PowerPoint here to briefly go over the formula and a little tiny bit more in depth on what RSI actually is so I have pulled up the shortest arguably PowerPoint you will ever see two slides one being this slide of Leno's RSI so we'll go forth what is RSI and in the formula logs explain what RSI is RSI is relative strength index like I mentioned a second ago and what that means for us is RSI is a momentum indicator I mentioned that before but it shows market movement measured by recent day and loss magnitude or relative strength so it takes how much in a given period the market has moved up or down takes decent averages of that gain or loss and creates this RSI indicator that we have known to love so here's the formula for RSI this isn't super super important but I think it does carry some importance just to know how the formulas calculated to have a little bit of extra knowledge behind it is 100 minus 100 divided by 1 minus RS now RS right here just is relative strength that's a separate calculation on its own and it's calculated like this so RS equals the average Y times the days up and the average Y comes days down and all that means in that – in layman's terms that means if you're doing the the textbook version of RSI is a 14 period EMA I should have put period up and periods down it's a 14 period RSI so we talked about candles before if you have it or working on a 14 period RSI that is 14 candles worth of RSI data whether it's days that's 14 days if it's for our candles like I do like to use that is either 14 for our candles one hour 14 1 hour candles and so on and so forth the next mono abcdefg so that is it how it's calculated but here's an example so a 14 period RSI what it does it takes how many days was it up what were the total points gained on the days that it was up and it will divide it by the total number of periods 14 that removes the average and it multiplies it by the days are up then divides it by the average of Y days down so does the same thing days down how many days were down what were the total points lost in those days down divides it by fourteen comes up with a moving average the RSI we call relative strength index and charts it on the bottom of these charts that we can use so that formula in it gives us a good base knowledge on just kind of how our si works but here's the technical and the real-world application for RSI so RSI will find a number between 0 and 100 and the healthy range that's been calculated for RSI is between 30 and 70 that's what this down here this purple block is and this purple line moving in it is the RSI now over here you can see on the top left I've set the RSI to the textbook 14 RSI out on the candle close that's typically how it is calculated and that is the default if you want to add an RSI indicator you come up here to indicators oops come on and I just would come in here and type in RSI and we type in our side you just click relative strength index and it'll populate down below and look exactly like that now when I say have you ever heard me say before in a video overbought and oversold all that means is when this purple line in the middle of this RSI and let's see if I can make this purple line a little thicker for you guys to see so there's that hard purple line when that purple line reaches the top of this purple block which is the 70 mark that is consumers considered overbought the momentum is a little too high and when it reaches the bottom or breaks that bottom seal of this purple block which is down around the 30 mark that means it's oversold and that looks to be a good entry point for any type of investor now obviously this indicator is not right 100% of the time I need I feel like we need to preface this there is no indicator that will be right 100% of the time but the culmination of a lot of indicators can give you significant market trends now if you wanted to just buy and sell based off of the RSI you would probably do pretty well to be perfectly honest and we'll go back into the November time of here's that which is about where the giant influx of people came in to cryptocurrency like October November December we'll just take November first for an example this is the Bitcoin $2 chart on BitFenix and I'll give you an example of how well you would have done just buying on RSI so if you de came in and you were a previous trader you know RSI even if you worked you did some research let's say you open a position down here when the RSI bottom to them on the thirty number here down low when it bottomed the Bitcoin was around the six thousand mark bottom here on the RSI if you would have sold sold part of your position here you know you sell it at the eight thousand mark and then it didn't break it again until it was at you know the nine thousand mark and then it broke it again away up here obviously I mean it pretty much stayed up but you could have closed portions of your position or just held through it not really worried about it but you can see it typically breaks it on the way up and then let's say on the way down you want to insert some more money into it but you want to go strictly off of RSI this is a very strict example you would have put more money in here a couple days before Christmas when it bombed out on the RSI around the 16 level but then you can see it went further down or I'm sorry yeah you bought there went further down here didn't to retouch the RSI tools at 17 and then it touched it and bounced off of this bottom RSI level all the way down to the 6k so you would have done okay if you would have that kind of that is in a very broad sense selling all the way up and buying on the way down but I don't think that's a perfect indicator long-term of yeah you know I definitely want to do this especially on the 4-hour chart if you went and looked at some longer-term less volatile markets where the RSI is a little tighter calculated you could have probably a better sense of super long term swings via RSI but in such a volatile market like crypto I feel like the 4-hour charts are better for short-term trades to couple RSI so that's a decent that's how people kind of use it I couple it with everything else but that's just one way to use it that is the very elementary way to use it by one it or sell one of touches the top which is the 70 mark or crosses it by one it touches the bottom those are decent to be honest decent indicators because you could have bought at twelve thousand here sold at seventeen thousand bought back in again at twelve thousand and you know bought some more and you can sell on the way back up that's decent but I want to talk about another method and that is called divergence and divergence not to be confused with the movie divergence is a little more it's not necessarily a complicated trading strategy but it does involve slightly different indicators so this is the light coin chart that I like to look at and there is called bullish divergence and bearish divergence now this does get slightly more technical but that's okay because it's still easy to understand now I talked about the RSI and a bearish divergence happens at the top end of the RSI and bullish at the bottom because like we said before typically if your overbought on the RSI you're looking at a downtrend and generally if your oversold you're looking at an upcoming uptrend so like I said that doesn't always work this in my opinion is a better indicator of what works so this is actually textbook so the RSI was way over bought when litecoin back in the very beginning of January hit that 290 mark you can see down here follow along up top with the little dotted white line so you can see down here RSI way oversold up here 290 mark market kind of pulled back down pulled the RSI back under made a last-ditch push and came way up here and cracked over 300 so you formed a higher high on the chart but you formed a lower high on the RSI that is a bearish divergence for RSI that's what that is so if you're looking at charts and you see a higher high on the chart but a lower high on the RSI that's a very strong indicator that you're looking at a downward market move because that wasn't a necessarily sustainable push it pushed higher with less momentum so you're looking at a bit of a free fall and in the next you know week week and a half litecoin did and came all the way down and touch this 220 mark and rode along there for a little while before obviously our crash here and later on in January but it did pull back significantly from 300 down to 220 and it did touch the bottom in the our side so that trend did work that is a bearish divergence now a bullish divergence on the same litecoin short if we look here a few days ago just about the 10th 11th of February this is a not quite as strong but it it certainly worked so website I actually move that the wrong spot so you're looking here you've formed a low here on the chart this needs to be moved I don't know why that was over there maybe you want to switch towards so you had the low here on the chart and you touch the bottom of the RSI and then you formed another low on the chart way down here but you have an increase in RSI from the 30 mark to about the 40 mark on the RSI if you're looking down at the bottom of your screen where I'm circling where the mouse is now if you look up is this low and then the RSI got drugged up a little higher but we made this low so that means you were gaining momentum but for whatever reason the price was still suppressed briefly that is a bullish divergence from RSI and as you can see we made a nice move from about the 100 level up to 150 and touch ended up touching the 170 level on this divergence before we hit the upper end of the RSI so that would have been a very significant trade a very nice trade if you were to may have made that on that bullish divergence so I hope that made sense I'll go over that briefly again the bullish or the bearish divergence is when you make a higher high on the chart but a lower high in terms of being over so overbought on the RSI and a bullish divergence whoa chart spaz attack a bullish divergence is when you make a lower low on the chart but a higher low on the RSI so when those two are opposites that is called divergence those are in my opinion a better market indicator than just using strict RSI and these are tools that I use when I trade when I'm looking at entry and exit points when I'm looking at hey this may be a great time to get into this coin these are some of the things that make the lights are flashing in my head that hey I may want to put a signal out on this coin for my kriptonite 9 group or for just myself I'm testing some theories and methods to potentially make short and midterm profits for trading cryptocurrency but I hope this you got something out of this I hope this was extremely useful information and I hope you can go pull up your own charts on trading view and put this into practice play around with this look at the RSI on the bottom look at how the charts correlate on the top and develop some sort of method that you can use in your crypto currency trading portfolio and on your journey so again I hope you guys got some out of this video if you did like it hit that thumbs up the bat that bat hit the thumbs up button down below it smash that subscribe button and that notification bell so you don't miss any of this kind of stuff that you could apply earlier in your portfolio and potentially make more money in the space so again I hope you guys got something out of the video thank you for making it this far in this video and I'll talk to you all next time

28 thoughts on “GUIDE TO USING RSI FOR CRYPTOCURRENCY”

  1. This is a bit more technical, so if you have any questions let me know! As always, drop a like and please subscribe!

  2. Could you make the lines of the RSI or any other indicator thicker and use a more contrasting color?

  3. You have very educational videos, I learn more from you everyday. I've only been in Crypto for a couple of months and Hodling but I would like to try my hand at trading. Keep up the good work- I'm glad I subscribed to your channel.

  4. Low volume is fine. Big week moving up. And today is the Chinese New Year! We should get bullish Sunday night

  5. hey crypto 99, love you videos… i would love to learn how to apply rsi to crypto…..are you available for training?

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