The following summarizes the core logic of RSI and MACD in practical applications
1. RSI Indicator: Determines market strength and reversal signals
RSI (Relative Strength Index) is an essential tool for mobile market observation
It mainly measures market heat through the ratio of price fluctuations
• Bull-Bear Demarcation Line: RSI uses 50 as the midpoint
Above 50 is considered a bullish market, where 50-80 is a strong buying zone
Below 50 is viewed as a bearish market, with 20-50 representing a weaker market
• Overbought and Oversold Warnings:
When RSI exceeds 80, it enters the overbought zone
If it forms an M-top or head and shoulders pattern, it is a strong downward reversal signal
When RSI falls below 20, it enters the oversold zone
If accompanied by a W-bottom, it indicates a potential upward reversal
• RSI Trend Line Application:
You can connect two or more peaks of the RSI indicator
Draw an ascending or descending trend line
When the price rises but RSI falls, it indicates that momentum is weakening
2. Indicator Divergence Quick Check: Uncovering the disguises at the end of trends
Divergence means the price is moving in the opposite direction of the indicator
It indicates that the current trend is losing momentum and is about to enter a correction or end
• Bearish Divergence (Top Divergence):
Price reaches a new high, but the indicator (such as RSI or MACD) declines
This indicates that bullish strength has reached a bottleneck, and the rise is nearing its end
• Bullish Divergence (Bottom Divergence):
Price reaches a new low, but the indicator rises
This represents a weakening of bearish pressure, nearing the end of the decline, and a bottom structure is forming
• Hidden Divergence and Exaggerated Divergence:
These subtle divergence signals can help traders determine whether the trend will continue
Or if a sharp directional switch is about to occur
3. MACD Strategy:
Advanced judgment of crossovers and structures
MACD determines short-term and long-term trend reversals through the interaction of DIF (fast line) and DEA (slow line)
• Golden Cross Strategy: DIF crosses above DEA
If it occurs above the 0 axis, it indicates strong trends that are likely to rise again
If it occurs below the 0 axis, it indicates that the market is starting to strengthen, making it likely to stop falling
• Death Cross Strategy: DIF crosses below DEA
If above the 0 axis, it indicates a weakening trend, potentially leading to a significant drop
If below the 0 axis, the trend further weakens, making continued declines likely
• Divergence Structure Confirmation:
The more tops that diverge, and the occurrence of MACD death cross, the stronger the sell signal for the top structure
The more bottom divergences, and the occurrence of MACD golden cross, the higher the confidence in buying