Among investors, they often choose to study technical indicators first.
There are many kinds of technical indicators, each has its own characteristics, functions and applicability.
So, how to set the RSI indicator in the forex operation?
If the price of a foreign exchange is now 10 yuan, when there are more bulls than bulls, that is, more willing buyers than willing sellers, the foreign exchange will rise.
Then the currency rose to 11 yuan.
As it turned out, there were still more optimists than pessimists.
This foreign exchange is still rising.
Let’s say it goes up to $12, $13, $14…
20 yuan.
At this time, through the recommendation of the stock review, the introduction of friends, more and more optimistic people, more and more.
It just kept going up.
Thirty yuan, forty yuan, fifty yuan…
100 yuan, each friend might as well think, this foreign exchange can rise all the time?
Apparently not.
No matter how good it is, it will stop going up at some point.
For example, if a foreign exchange goes from 10 yuan to 50 yuan, the RSI is close to 100 yuan.
That’s when everyone is bullish, and that’s when people start to want to sell.
Why is that?
Because the hand holds a lot of chips, he will think: if not popular enough time to start shipping, if it starts to fall, so many chips in the hand, can not be distributed.
So even if everyone thinks the currency will go up, some of those who think it will go up are selling.
Although he knew the currency would rise, he had to sell before it peaked in order to cash in on his large holdings.
Otherwise, his profits will become a bubble and evaporate.
As a result, many people who expect the foreign exchange to rise to 50 yuan, especially those who have too many chips in their hands, may start to sell the foreign exchange at 45 yuan or lower.
From this point of view, there must be a lot of people are still optimistic, ready to ship or have shipped.
So, an RSI of 100 means everyone is bullish on the currency.
More lurks the huge crisis of shipping.
Like a balloon, when blown to the maximum, the bursting crisis will be generated.
Once it starts to fall, the foreign exchange, which everyone is bullish on, will produce a “flying down 3,000 feet, suspected to be the Milky Way falling nine days” landscape.
Because countless times of experience has made the vast majority of people in the currency market have understood this truth, even if they do not understand this truth, more or less will suffer less than to sell.
As a result, when a currency retreats at a high level, those who have already made profits will rush to sell, pocketing the profits.
High chase into the people who do not profit, as long as the mind is active, will quickly cut out the meat, go first.
On the other hand, when everyone is bullish on a currency pair, that is, when the RSI is close to 100, the price of the currency tends to far exceed its actual value.
Such a situation is commonly referred to as overbought phenomenon.
An overbought situation is one in which the buyer buys the wrong currency.
So, in an overbought situation, once the fall, due to this foreign exchange, is not worth the price, it is not surprising to fall.
That’s the case where RSI is 100, and then the case where RSI is 80 or close to 80, it’s a little bit easier to understand.
As mentioned earlier, when the RSI is 100, someone starts shipping before that.
So when was this before?
In terms of RSI alone, as a trader, why don’t I start selling at 95, knowing that I won’t have time to sell at 100?
This one will do.
But if most of them have summed up this experience at an RSI of 95, then who will buy?
If there are few buyers, can you guarantee that your currency will be sold at an RSI of 95?
So, somebody starts selling when the RSI is equal to 90.
Similarly, people will start selling earlier and earlier.
This is what the books often say about being ready to sell when the RSI is 80.
Conversely, when the RSI is equal to 20, it is also a good time to prepare to buy.
Having said the above, it is easy to grasp the different values of RSI in different foreign exchange by explaining the practical significance of RSI.
In short, the RSI can tell you exactly how many people are bullish and how many are negative.
As for this proportion, it is different for each foreign exchange and different disk situation, its meaning is different.
Water can carry a boat or overturn it.
Specific use, on the improvisation.
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