- Bitcoin’s bottoms and risks could be seen using the relative strength index indicator.
- This makes the traders buy the crypto in a dip without fear.
- Leading traders slowly hit the jackpot using the RSI signal.
There are few assets that enter the bear phase sometimes and we could see the negative headlines. This project analysts downside and the sentiments move from hope to pure gloom and doom. However, this results in panic gripping traders dump their positions near the bottom downtrend rather than buying.
More so, this makes crypto traders wonder how to build the courage to buy in a bear trend. It is not easy to purchase early, because it may soon turn into a loss. In contrast, if they wait too long, they might miss the early part of the rally.
For instance, the relative strength index (RSI) indicator can notify the market bottoms and favorable risk to reward scenarios.
In the first four instances, the RSI dipped close to or just below the 30 levels but during the fifth time, the RSI dropped near 10.50. More so, the long bear market ends after a prolonged time of selling based on fear. Smart traders will wait for these chances and buy Bitcoin when the market oversold deeply, such as when RSI stays below 20.
As shown in the chart above, between 2019 and 2020 RSI dropped close to 20 on two occasions and dropped to 15 on March 12, 2021. This indicates that traders need to be ready to end their positions. This is because if traders don’t do so, the losses might keep growing.
Furthermore, the RSI plunged to 15.04 on March 12, 2020, and smart traders who were ready to buy after this drop would have made outstanding gains held onto their positions during the bull phase, which spiked to $64,854 on April 14, 2021. This represents the way after two losing purchases, traders slowly hit the jackpot using the RSI signal.