Relative Strength Index (RSI)

Relative strength Index or just RSI, is a very popular indicator developed by J.Welles

Wilder. RSI is a leading momentum indicator which helps in identifying a trend

reversal. RSI indicator oscillates between 0 and 100, and based on the latest

indicator reading, the expectations on the markets are set.

The term “Relative Strength Index” can be a bit misleading as it does not compare

the relative strength of two securities, but instead shows the internal strength of the

security. RSI is the most popular leading indicator, which gives out strongest signals

during the periods of sideways and non trending ranges.

RSI is a momentum oscillator which oscillates between 0 and 100 level

A value between 0 and 30 is considered oversold, hence the trader should look at

buying opportunities

A value between 70 and 100 is considered overbought, hence the trader should look

at selling opportunities

If the RSI value is fixed in a region for a prolonged period, it indicates excess

momentum and hence instead of taking a reversed position, the trader can consider

initiating a trade in the same direction.

Finally, do remember RSI is not used often as a standalone indicator by traders, it is

used along with other candlestick patterns and indicators to study the market.

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