Relative Strength Index (RSI)
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THE RELATIVE STRENGTH INDEX (RSI) is a momentum indicator used in technical analysis that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can have a reading from 0 to 100.
Bullish signal: The RSI cross above 30
Bearish signal: The RSI cross below 30 (Oversold)
Bullish signal: The RSI cross above 70 (Overbought)
Bearish signal: The RSI cross below 70
RSI length: 14
High level: 70
Low level: 30
The default look-back period for RSI is 14, but this can be lowered to increase sensitivity or raised to decrease sensitivity. 10-day RSI is more likely to reach overbought or oversold levels than 20-day RSI. The look-back parameters also depend on a security's volatility.
The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30. Signals can be generated by looking for divergences and failure swings. RSI can also be used to identify the general trend.
