How to Use RSI Indicator | Firstock – A Complete Beginner-Friendly Guide

Introduction

Have you ever looked at the stock market and wondered, “How do traders know when to buy or sell?” One of the simplest tools that even beginners can master is the RSI Indicator. If you’re using the Firstock option trading app, understanding how RSI works can completely change the way you trade.

Think of RSI like a speedometer for stock momentum. Just as a speedometer tells you whether a car is going too fast or too slow, RSI tells you whether a stock is potentially overbought or oversold. Simple, right?

This guide breaks down what is RSI indicator, how to use RSI indicator, and how it helps in spotting RSI indicator buy and sell signals — all in easy, conversational, and practical explanations.

Learn how to use RSI indicator, what is RSI indicator, rsi indicator buy and sell signals, rsi indicator & option trading app insights in this easy guide.

Understanding What Is RSI Indicator

The RSI (Relative Strength Index) is one of the most widely used momentum indicators in the world of trading. It helps you understand whether a stock or index is overbought or oversold.

• Overbought = Price may fall soon 
• Oversold = Price may rise soon 

Created by J. Welles Wilder, RSI gives you a reading between 0 and 100.

If you’ve ever wished trading felt more predictable, RSI might just be your best friend.

How RSI Works – The Simple Explanation

Imagine a tug of war between buyers and sellers.

• When buyers are stronger → RSI goes up 
• When sellers are stronger → RSI goes down 

It’s that simple.

RSI shows you which side is winning and whether the trend is getting too extreme.

Why RSI Matters in Trading

RSI helps you:

• Avoid buying at the peak 
• Avoid selling at the bottom 
• Find trends before they start 
• Spot trend reversals 
• Make smarter trades using the Firstock option trading app 

In short, RSI helps you trade with confidence instead of guesswork.

RSI Formula (Explained in Simple Words)

The actual formula is technical, but here’s the easy version:

• RSI compares recent gains to recent losses. 
• If gains are bigger → RSI rises 
• If losses are bigger → RSI falls 

That’s all you need to know — the Firstock trading app calculates everything automatically.

How to Use RSI Indicator on Firstock App

Using RSI on Firstock is beginner-friendly:

1. Open Firstock’s Option Trading App 
2. Select a stock, index, or F&O contract 
3. Click Indicators 
4. Choose RSI 
5. Leave the default setting (14 period) 
6. Apply and start analyzing the chart 

Within seconds, you’ll see an RSI line below the chart.

RSI Indicator Buy and Sell Signals

Here’s the golden rule:

Buy Signal (Oversold Zone)

If RSI < 30, the stock is oversold.
This means sellers may be exhausted, and the price could rise.

→ RSI Buy Signal: RSI crosses above 30

Sell Signal (Overbought Zone)

If RSI > 70, the stock is overbought.
This means buyers may be overheating, and the price might fall soon.

→ RSI Sell Signal: RSI crosses below 70

These are the simplest and most effective signals for beginners.

RSI Levels and What They Mean

If you’re new, just remember:
RSI near 30 = Buy zone
RSI near 70 = Sell zone

RSI Divergence – Hidden Clues for Traders

Divergence happens when price goes one way, but RSI goes the opposite way.

Bullish Divergence

• Price makes a lower low 
• RSI makes a higher low
  → Trend reversal upward possible 

Bearish Divergence

• Price makes a higher high 
• RSI makes a lower high
  → Trend reversal downward possible 

Divergence is like spotting a twist before it appears in a movie.

Best RSI Settings for Beginners

The default 14-period RSI works best for most trades.

But depending on your style:

• 9-period RSI → Faster signals 
• 21-period RSI → Smoother signals 

For everyday traders using Firstock, 14-period is perfect.

Using RSI for Intraday Trading

Intraday traders love RSI because it reacts fast.

Best strategy:

• Buy when RSI moves above 30 
• Sell when RSI moves below 70 
• Watch 5-min, 15-min, or 1-hour charts 

Avoid using RSI alone; confirm with trend direction.

Using RSI for Options Trading

In options trading, timing is crucial — RSI helps with that.

Use RSI for:

• Buying CALL options when RSI rises from 30 
• Buying PUT options when RSI falls from 70 
• Avoiding option trades in sideways markets 
• Identifying momentum shifts before expiry 

The Firstock option trading app makes analyzing RSI quick and effortless.

Common Mistakes to Avoid With RSI

Even experienced traders make these errors:

Mistake 1: Buying just because RSI is below 30

Sometimes stocks fall further.

Mistake 2: Selling just because RSI is above 70

Strong stocks can stay overbought for days.

Mistake 3: Using RSI without checking trend

RSI works best in trending markets.

Mistake 4: Overusing too many indicators

Keep your chart clean and simple.

Combining RSI With Other Indicators

To increase accuracy, combine RSI with:

1. Moving Averages

Confirm whether the stock is in an uptrend or downtrend.

2. MACD

Gives trend direction and momentum.

3. Support & Resistance

RSI works beautifully near major levels.

4. Volume Indicators

Volume helps confirm RSI signals.

Together, they make your trading decision stronger.

Best Tips for Using RSI Like a Pro

Here are some expert-backed tips:

• Use RSI with price action 
• Avoid trading when RSI stays between 40–60 for long 
• Always check the larger trend 
• Use divergence for early trend changes 
• For options, always match RSI signals with volatility 

The more you use RSI, the more natural it becomes.

Final Thoughts on RSI Indicator

The RSI indicator is one of the easiest and most powerful tools for beginners and seasoned traders alike. Whether you’re using it for stocks, intraday, or options trading on the Firstock app, RSI can significantly improve your timing and decision-making.

The key is to keep it simple, practice regularly, and combine it with basic market understanding.

Remember — RSI is not magic, but in the right hands, it’s incredibly effective.

Frequently Asked Questions (FAQs)

1. What is the RSI indicator used for in trading?

RSI helps identify whether a stock is overbought or oversold, giving traders insight into potential buy or sell opportunities.

2. How to use RSI indicator for buy and sell signals?

Buy when RSI rises above 30 (oversold) and sell when RSI falls below 70 (overbought).

3. Is RSI good for intraday trading?

Yes, RSI is widely used by intraday traders for catching quick momentum-based moves on shorter timeframes.

4. What is the best RSI setting for beginners?

The default 14-period setting is ideal for most beginners.

5. Can I use RSI for options trading on the Firstock app?

Absolutely. RSI helps options traders time entries more accurately for CALL and PUT options.