RSI or Relative Strength Indicator indicates the oversold and overbought condition of the market. RSI is counted from 0 to 100. Usually, a reading of less than 30 is considered as oversold and a reading over 70 is overbought. RSI is most used in confirming trades. A reading of more than 50 hints the existence of an uptrend. On the other hand, RSI reading of less than 50 indicates a downtrend.
When RSI starts to go up or down and finally crosses the 50 line, a new trend has started. Once you have confirmed that you have spotted a new trend, find out a working entry point for you. Combining RSI with other trend confirming indicators will provide more accurate results and will help you in avoiding confusions. You should plan your trades depending on the strength of the ongoing trend. A quick look at the RIS will help you in getting the current mode of the market.
RSI is a popular indicator that has been used for a long period of time. No matter how the market acts, RSI remained necessary for the traders. You should alert about the large bars and drops of price of the pairs which will make the RSI provide wrong or misleading signals. RSI performs best when it is combined with other tools. Consider this indicator as a single part of your trading strategy and do not depend on it only.