When you’re a beginner in the world of trading, everything looks like a signal. You open a chart and boom — candles, lines, moving averages, RSI, MACD, Bollinger Bands — it’s like someone spilled spaghetti and decided to call it analysis.
If you’re overwhelmed, you’re not alone. I’ve been there, and I’ve blown more than a few trades just because I was guessing, not analyzing.
But there’s one trading indicator that changed the game for me — and it just might save you from jumping into bad trades, too.
Let’s dive into what it is, how to use it, and why it’s one of the best trading indicators for beginners who are tired of overthinking.
First, Why Indicators Even Matter
Trading indicators are tools that help you make sense of price action. They take raw data — price, volume, time — and translate it into something more understandable.
Indicators can tell you:
- Whether something’s overbought or oversold
- If a trend is forming or ending
- When a reversal might happen
- Whether a breakout is real or fake
- But here’s the thing: you don’t need 10 indicators. In fact, too many can lead to what traders call analysis paralysis.
- If I could recommend just one indicator for a new trader to start with, it’s this one…
Meet the RSI: The Relative Strength Index
RSI (Relative Strength Index) is my go-to tool — especially for beginners. It’s clean, simple, and incredibly powerful.
What is RSI?
RSI is a momentum indicator that measures how fast and how much a price has moved in a certain direction. It gives you a number between 0 and 100:
Above 70: The asset is considered overbought (might be due for a pullback)
Below 30: The asset is considered oversold (might be ready for a bounce)
Why It’s So Useful for Beginners
Because it gives you context. RSI tells you whether you’re entering a trade that’s already made a big move — and might reverse — or whether you’re catching something that’s cooled off and ready to move again.
It’s basically a traffic light:
Green = RSI is low → potential buying opportunity
Red = RSI is high → be cautious, might be overheated
How RSI Saved Me from a Terrible Trade
Let me share a quick story.
- A few months into my trading journey, I spotted a hot stock that had exploded over 20% in a single day. Twitter was buzzing. YouTubers were pumping it. I had major FOMO.
- I was about to buy — fingers hovering over the button — when I glanced at the RSI.
It was at 91. - Now I didn’t know much at the time, but I had learned that anything above 70 was considered overbought. And 91? That’s borderline dangerous.
- I hesitated. Waited a day. And sure enough — the next day, the stock tanked 12%.
- Lesson learned: RSI isn’t magic, but it can absolutely help you dodge risky, emotionally-driven trades.
How to Use RSI in Real-Life Trading
You don’t need to get fancy. Here’s a super simple way to start using RSI as a beginner.
Buy Setup (Potential Reversal)
- RSI drops below 30
- Price hits a support zone
- Volume starts to rise
- This combo can signal a potential bounce — especially in an uptrend.
Sell Setup (Avoiding FOMO Trades)
- RSI is above 70
- Price just made a big jump
- No news or clear reason for the spike
- This is when you want to step back and let things cool off before jumping in.
Bonus Tip: Look for Divergence
Sometimes price keeps moving up, but RSI starts moving down. This is called bearish divergence and can be an early signal of a reversal.
The opposite is true too: if price is falling but RSI is rising, that’s bullish divergence — and can be a good entry signal.
Other Indicators That Pair Well with RSI
While RSI is powerful on its own, it gets even better when used with other beginner-friendly indicators. Here are two that pair really well:
1. Moving Averages (MA)
Use a 50-day MA or 200-day MA to identify the overall trend
When RSI is low and the asset is above the moving average → strong buy signal
2. Support and Resistance Levels
Combine RSI with price zones where the asset has bounced or reversed before
If RSI is below 30 and price is sitting on a known support level → high-probability bounce
The Do’s and Don’ts of Using RSI
Here are a few tips to avoid common beginner mistakes:
Do:
Use RSI to confirm trade setups, not as the only reason to buy or sell
Adjust RSI settings (some traders prefer 14, others use 5 or 10 for faster signals)
Combine RSI with basic price action or support/resistance zones
Don’t:
Buy just because RSI is under 30 — oversold can stay oversold for a while
Use RSI on very short timeframes (like 1-minute charts) — it gets noisy
Ignore the trend — RSI works best in the context of trend direction
Why RSI Is the Best Starter Indicator (IMO)
If you’re looking for the best trading indicators for beginners, I truly think RSI is the one to start with. Here’s why:
- Visual simplicity: It’s just one line between 0 and 100
- Clear signals: You know what overbought and oversold mean
- Works on any market: Stocks, crypto, forex — RSI doesn’t discriminate
- Supports better habits: It encourages patience and waiting for better entries
- And perhaps most importantly — it builds confidence. When you start seeing patterns form and signals play out, you realize you’re not just guessing anymore. You’re analyzing.
Final Thoughts: One Indicator Can Go a Long Way
- There are hundreds of tools out there, and it’s easy to think you need to know them all to be a “real” trader.
- But when you’re starting out, less is more. And the RSI? It gives you clarity in chaos. It helps you avoid emotional trades and time your entries with logic, not luck.
- So if you’re overwhelmed, start with just one. Learn the RSI inside and out. You might be surprised how much it can improve your trades — and your mindset.
Next Article To Read: Can You Make Money With Just One Stock? I Tried It!