Relative Strength Index

Moneybestpal Team

The relative strength index (RSI) is a technical analysis indicator that assesses the strength of price movement for an asset over a predetermined time frame. 

The average gain and average loss of the price of an asset during a chosen time period, usually 14 days, are compared, and the ratio of these figures is used to construct the relative strength index or RSI.

Overbought and oversold levels are commonly denoted by values of 70 and 30, respectively, on the RSI displayed on a scale from 0 to 100. The asset is regarded as overbought when the RSI is above 70, and a sell signal may be issued. On the other hand, if the RSI falls below 30, the asset is regarded as oversold, and a buy signal may be issued.

Investors and traders use the RSI to spot probable trend reversals or validate the strength of an ongoing trend. The RSI should, however, be used in conjunction with other technical and fundamental research instruments because it is not always a reliable indication.

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