The Relative Strength Index (RSI) momentum indicator

The Relative Strength Index (RSI)

A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought oversold and conditions of the asset. It is calculated using the following formula:
RSI = 100 - (100 \ 1 + RS)
RS = Average of x "above closes / Average of x days down closes days
As you can see from the chart below, the RSI ranges from 0 to 100. Leverage is considered to be overbought once the RSI approaches the 70 level, which means that you may be getting overvalued and is a good candidate for withdrawal.
Also, if the RSI approaches 30, it is an indication that the funds may be getting oversold and therefore likely to become undervalued.

A trader using RSI should be aware that large surges and drops in the price of assets will affect the RSI by creating false buy or sell signals. The RSI is best used as a valuable complement to other stock picking tools.