• First, you need to add the RSI indicator to your chart. You can use any charting software that supports the RSI, such as TrendSpider or TradingView. You can also calculate the RSI yourself using the following formula: RSI = 100 - (100 / (1 + RS)), where RS is the average gain divided by the average loss over a certain period of time1.

  • Second, you need to choose the time period and the levels for the RSI. The default time period is 14, which means the RSI uses the last 14 price bars to calculate its value. You can adjust the time period according to your trading style and preference. The default levels for the RSI are 30 and 70, which indicate oversold and overbought conditions respectively. You can also adjust these levels to make the RSI more or less sensitive to price changes2.

  • Third, you need to interpret the RSI signals and use them in conjunction with other technical indicators and price action. The RSI can generate different types of signals, such as:

    • Crossing the levels: When the RSI crosses above 30 from below, it indicates a bullish signal and a possible buying opportunity. When the RSI crosses below 70 from above, it indicates a bearish signal and a possible selling opportunity2.

    • Divergence: When the RSI diverges from the price, it indicates a weakening of the current trend and a potential trend reversal. For example, if the price makes a higher high but the RSI makes a lower high, it indicates a bearish divergence and a possible downtrend. If the price makes a lower low but the RSI makes a higher low, it indicates a bullish divergence and a possible uptrend2.

    • Failure swings: When the RSI fails to break above or below a certain level, it indicates a failure swing and a trend signal. For example, if the RSI makes a lower high below 70 and then falls below its previous low, it indicates a failure swing top and a bearish signal. If the RSI makes a higher low above 30 and then rises above its previous high, it indicates a failure swing bottom and a bullish signal3.

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