Trading the cryptocurrency market using true strength index

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4 years ago

True strength index is a crossover momentum oscillator indicator.

As a crossover momentum oscillator indicator,True strength index indicator was created by William Blau to help traders know whether the market has experienced an overbought or oversold condition.As a crossover momentum oscillator,True strength index indicator has two crossover lines,the red and the blue line.The red line indicates the signal line while the blue line indicates the true strength indicator.

True strength index indicator has oscillation at point 0 ranging between -100 to 100. When crossover occurs at above 25,that is an indication of an overbought market while when it occurs at below -25,that is an indication of an oversold market.

According to William Blau, the values of True strength index is calculated as follows;

True strength index indicator(TSI)=( DOUBLE SMOOTH PRICE CHANGE/DOUBLE SMOOTH ABSOLUTE PRICE CHANGE)*100

We can therefore further explain the indicator based on oversold and overbought condition as follows;

1. True strength index cryptocurrency oversold

Since True strength index indicator is an oscillator and is based on crossover of the TRI above or below the signal line to indicate oversold and overbought in the market ,it therefore follows that when the True Strength index crosses above the signal line at below -25,that will be an indication of an oversold market thus the cryptocurrency trader should buy a given amount of cryptocurrency with their USDT balance. The cryptocurrency trader can either place a market buy order which will be processed immediately or they can place a limit buy order which will be processed when the market reaches their limit buy order. This is indicated as from the candlesticks chart below;

The above is a market for TRX. From the market,three points are being indicated. There is point A ,Point B and point C. Point A represents the True Strength index while point B represents the signal line. On the other hand,point C is the oversold condition point. At point C,the True strength index has crossed above the signal line at below -25 thus an indication of an oversold market over there. This signals the cryptocurrency trader to purchase a given amount of TRX with their USDT balance. The trader can either place a market buy order which will be processed immediately or they can place a limit buy order which will be executed when the price in the market reaches their limit buy order. When the order is being processed,their account will start increasing in value in terms of USDT if the market is moving upwards.

2. True strength index cryptocurrency overbought

Since True strength index indicator is an oscillator and is based on crossover of the TRI above or below the signal line to indicate oversold and overbought in the market ,it therefore follows that when the True Strength index crosses below the signal line at above 25,that will be an indication of an overbought market thus the cryptocurrency trader should sell a given amount of cryptocurrency which he had previously purchased and is currently holding in order to avoid declining the value of their account. The cryptocurrency trader can either place a market sell order or they can place a limit sell order. The market sell order will be processed immediately while the limit sell order will be processed when the market reaches their limit order price. This is indicated as from the candlesticks chart below;