C.V.O. CA'S NEWS & VIEWS Compiled by: CS Keyur Jitendra Furia capitalytic 38 VOL. 23 - NO. 7 - FEBRUARY 2020 Relative Strength Index (RSI) {Momentum Indicator} The Relative Strength Index (RSI), developed by J. Welles Wilder, is a Momentum Oscillator that measures the speed and change of price movements. The RSI oscillates between 0 to 100. The Relative strength index (RSI) is a used in the analysis of . It is intended to chart the current and technical indicator financial markets historical strength or weakness of a stock or market based on the closing prices of a recent trading period. Traditionally the RSI is considered overbought when above 70 and oversold when below 30. The RSI is most typically used on a 14-day timeframe, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Shorter or longer timeframes are used for alternately shorter or longer outlooks. More extreme high and low levels—80 and 20, or 90 and 10—occur less frequently but indicate stronger momentum. Signals can be generated by looking for divergences and failure swings. RSI can also be used to identify the general trend. The RSI provides signals that tell investors to buy when the security or currency is oversold and to sell when it is overbought. The RSI is presented on a graph above or below the price chart. The indicator has an upper line, typically at 70, a lower line at 30, and a dashed mid-line at 50.
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C.V.O. CA'S NEWS & VIEWS
Compiled by:
CS Keyur Jitendra Furia
capitalytic
38
VOL. 23 - NO. 7 - FEBRUARY 2020
Relative Strength Index (RSI) {Momentum Indicator}
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a Momentum Oscillator that measures the speed and change of price movements. The RSI oscillates between 0 to 100. The Relative strength index (RSI) is a used in the analysis of . It is intended to chart the current and technical indicator financial marketshistorical strength or weakness of a stock or market based on the closing prices of a recent trading period. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.
The RSI is most typically used on a 14-day timeframe, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Shorter or longer timeframes are used for alternately shorter or longer outlooks. More extreme high and low levels—80 and 20, or 90 and 10—occur less frequently but indicate stronger momentum. Signals can be generated by looking for divergences and failure swings. RSI can also be used to identify the general trend. The RSI provides signals that tell investors to buy when the security or currency is oversold and to sell when it is overbought.
The RSI is presented on a graph above or below the price chart. The indicator has an upper line, typically at 70, a lower line at 30, and a dashed mid-line at 50.
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RSI Indicator Trading
If the RSI is less than 30, it means that the market is oversold, and that the price might eventually increase. Once the reversal is confirmed, a buy trade can be placed. Conversely, if the RSI is more than 70, it means that it's overbought, and that the price might soon decline. After a confirmation of the reversal, a sell trade can be placed. The 50 level is the midline that separates the upper (Bullish) and lower (Bearish) territories. In an uptrend, the RSI is usually above 50, while in a downtrend, it is below 50.
RSI Divergence
A divergence forms on your chart when price makes a higher high, but the indicator you are using makes a lower high. When your indicator and price action are out of sync it means that “something” is happening on your charts that require your attention and it's not as obvious by just looking at your price charts. Basically, a divergence exists when your indicator does not “agree” with price action.
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Example of Divergence
How to Trade Using RSI ? RSI can be used just like the stochastic momentum indicator.
We can use it to pick potential tops and bottoms depending on the market is overbought or oversold.
RSI is a very popular tool because it can also be used to confirm trend formations.
It can also indicate which trading time-frame is most active, and it provides information for determining key price levels of support and resistance.
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