## The correct use of the RSI indicator effectively grasps the low and high points

Let's go back to the software first and open the RSI indicator. For the RSI indicator, we can use the standard parameter of 14, and we don't need to change anything else; we can just use the default parameters set in the software.

The RSI indicator is divided into three parts: one is the normal range, which is between 70 and 30, where the indicator operates normally. The other two are the overbought and oversold areas. The indicator enters the overbought area when it breaks above 70 and enters the oversold area when it breaks below 30. The level of 50 serves as a boundary between strength and weakness.

If the RSI indicator's parameter value is greater than 50, we generally consider it to indicate a strong upward trend. If it falls below 50, we consider it to indicate a stronger downward trend.

Of course, these are the conventional uses that everyone can learn from textbooks. However, when we use this indicator for intraday trading, it differs slightly from the conventional use. The conventional theories can be found in textbooks, but what we commonly use is a point that I have summarized in my intraday trading.

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You can see that this indicator cannot be used in isolation; it must be combined with the K-line movement.

Please note that the translation provided is a direct interpretation of the original text and does not include any additional context or explanation of the RSI indicator or intraday trading strategies, as the original text did not provide such details.In normal circumstances, we observe that when the K-line is falling, the indicator follows suit and moves downwards. When the K-line is rising, the indicator also follows and moves upwards. If the K-line forms a wave pattern, the indicator will similarly form a wave pattern. This is typically the case under normal conditions.

So, it seems that under normal circumstances, there is not much change when we trade with it, but you also can't find a reasonable entry and exit point.

When we engage in intraday trading, we need to select a specific point within a particular environment. Let's take a look; we see the price moving downwards, forming a retracement wave, and the price continues to move downwards.

At this time, we look at it in conjunction with the indicator. What is the current situation of the RSI? Let's first look at this part, and when we correlate this part, it's such a process, right? The price has been in an overbought zone and has been falling consistently.

We identify this part.

Then, as it enters a correction, the price also enters a correction, and then the price continues to decline, right? The price has declined, and a previous low point of a K-line has formed a new low.

But at this point, let's take another look at the RSI indicator; it has not formed a new low. This is a specific point that we need to use in intraday trading, which we have discovered through careful observation.

When the price forms a new low, creating a wave-like new low, but the RSI indicator does not form a new low, it tells us that within the overbought zone, we can enter. Theoretically speaking, as the K-line moves downwards, the RSI indicator should follow and move downwards as well. When the K-line forms a new low, the RSI indicator should also form a new low.Currently, the candlestick is trending downwards, with the price hitting a new low. Although the RSI indicator is in the overbought territory, it has not set a new low. This signals to us that the price may be bottoming out. At this specific point, where the price rapidly increases in volume, we can take a long position, creating an excellent opportunity to bottom-fish and rebound.

So, to say, all the previous discussions about the RSI indicator were somewhat trivial, but what we truly need to apply is the point I just mentioned. In other words, all the theoretical learning of the RSI indicator ultimately serves this one point. The earlier part is basic knowledge, but the latter is the optimal entry point we truly need to achieve to ambush it.

Our entry point using the RSI indicator is generally in conjunction with a 5-minute candlestick for trading. Of course, one can also summarize whether the occurrence and success rates of such situations are high with 15-minute or hourly charts. However, since we are engaged in intraday trading, we typically use the 5-minute candlestick in conjunction with the RSI indicator to find such an entry point. It might present an opportunity every one or two days, or every two or three days. Over a month, we can achieve about ten trades just using the RSI indicator.

The success rate is generally over 80%. In other words, if we, as traders, seek out this point of divergence in the RSI indicator every day for trading, the returns over a month can be very substantial because your success rate is extremely high.

Take this point, the same as the one just mentioned, where the price breaks the low point and rapidly increases in volume, but the RSI indicator does not drop. We can grab a rebound near this area, and once the price retracts, we can exit the position.

At this time, our capital is essentially without drawdown, and it might even be possible to achieve zero drawdown, meaning our psychological burden is quite light, and we can quickly retract and leave the position. Let's look at our profit point, from the low to the high, there are twenty-five points. Excluding the spread, we have a profit of twenty points.

Assuming you have $10,000, our standard entry point, you might consider a position of 0.3 to 0.5 lots. If you go for 0.5, our return rate would be 1%.If we continue with this calculation, what if we do this ten times a month? If it's 1% per time, ten times would be 10%, right? So if we use this indicator, it's a specific point, and at the same time, we also need to grasp a regular point.

What is the regular point?

It operates in conjunction with our K-line, right? So at this time, if we follow the K-line and moving average as we discussed in the last lesson, and also use the RSI indicator for trading, what does that equate to?

It equates to having two indicators overlapping and resonating for trading, thus forming a new entry point.

Let's find a position and use this place as an example.

The moving average is heading upwards, and so is the price, with a wave going up, then entering a retrace, let's take a look.

The RSI indicator, like the K-line, enters a horizontal consolidation, and upon retracing, it does not drop below the 30 level, which proves that the price is very strong upwards, right? The RSI indicator rises, the retrace coincides with the K-line, and when breaking through the high point, the RSI indicator also does not reach the 70 mark, meaning it has not entered the overbought territory.

So in this case, we can conduct a long trade at this break point. We can trade a long position at this break point.

The first premise is what? At the break point, the price, or rather the RSI line, should not exceed 70. If it exceeds 70, your entry may result in a smaller subsequent profit space, or even no profit space, or it could be a false breakout.At this point, it hasn't reached 70, so once we enter at this point, the price quickly increases in volume and then rises above 70, which means it enters our oversold area. In that case, we can quickly exit, and we don't need to hold for a high profit point; it might be sufficient to have ten or twenty points.

When we enter the oversold area and the price quickly increases in volume, we exit quickly. In this way, our RSI indicator has two entry points. What is the first one? The first one is when the RSI indicator shows divergence, which is a quick entry point for us to grab a rebound.

What is the second indicator? What is the second entry point? The second one is when the price is in its regular operation, and we observe that the price enters a consolidation phase and then quickly breaks through the previous high point, while the RSI does not reach the 70 level. At this position, we choose to enter.

When the RSI indicator quickly breaks through and surpasses 70, entering the oversold area, that is the time for us to exit. This is how we conduct intraday trading, using the RSI indicator to choose the two important points for entry, which is also the core point of using the RSI indicator for trading.

Alright, that concludes this lesson. If anyone has any further questions, please leave a comment below the course, and we can have an in-depth discussion after class.