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Relative Strength Indicator – RSI

Relative Strength Indicator – RSI

Relative Strength Index is a so called momentum indicator that is very popular to use in technical analysis of financial instruments.

Relative Strength Indicator is a momentum indicator that compares the number of days with price increases in relation to the number of days with decrease. This indicator indicates whether a stock is overbought or oversold. RSI analyzes the recent performance of a security in relation to its own price history. RSI is a valuable tool to determine overbought/oversold levels.

Values above 70 are considered to indicate an overbought situation where the price increased over time and perhaps will correct downwards. Opposite, values below 30 indicate an oversold situation where the stock has fallen a lot over time, and perhaps will correct upwards.

A trader might buy when the RSI crosses above the oversold line (30).

A trader might sell when the RSI crosses below the overbought line (70).

RSI is used for analysis of momentum and potential trend reversal

 



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