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
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.