RSI-relative strength index
“Inventor-j.welles wilder,jr, invented in 1978”
What is Relative Strength Index (RSI)?
Relative Strength Index (RSI) is a momentum oscillator, Measuring the velocity and magnitude of direction of price movements. Momentum is the rate of the rise or fall price in RSI. It is used in computer momentum. The relative strength index was developed by j. Wellles Wilder and published in a 1978 book.
Bearish divergence occurs when price makes a new high but the RSI makes a lower high, thus failing to confirm. Bullish divergence occurs when price makes a new low but RSI makes a higher low.
How to calculate RSI?
The smoothed moving averages should be appropriately initialized with a simple moving average.
How does RSI help in trading?
The price oscillates between 0 and 100, traditionally the RSI is considered overbought when above 70 and over sold when below 30.
When indicators start going above 70, then it’s called the market overbought and it signals for the sell.
When indicators start going below 30 , then it’s called the market oversold and it’s a signal for buy.
Uptrend and downtrends:
(1)RSI Bullish-indicators survive in the range of 50-100.
(2)RSI bearish-indicators survive in the range of 0-50.
(3)RSI sideways-when indicators survive around 50,minor momentum
Indicators pattern-double top and bottom double:
Whenever an indicator creates a double top in the range of 70-100,then is the signal of strong reversal.
Whenever an indicator creates a double bottom in the range of 0-30,then is the signal of a strong reversal.