Technical Analysis - Relative strength indicator

Technical Analysis - Relative strength indicator

Subject: Technical Analysis - Relative strength indicator
The relative strength indicator (RSI) was developed by J. Welles Wilder in 1978. This indicator is one of a family of indicators called oscillators, because it varies (oscillates) between fixed upper and lower limits. This especially should be an indicator of the song price momentum.
Wilkder relative strength indicator is based on the observation that stocks that thrive will tend to close nearer to the day of high low. The reverse is true for the reduction of stocks. It is easy to confuse Wilder relative strength indicator relative strength with other numbers that are published. Wilder indicator compares the price performance of shares of one of themselves and may be more appropriately called "Internal Strength Index. Stayed
similar name indicators compare the cost of the action of some market index or another market.
This indicator has been developed in many forms, but Wilder RSI is generally regarded as most helpful. The oscillator is indexed from 0 to 100, and as all oscillators it indicates overbought and oversold readings. Oscillators RSI is most useful in the trade channels, especially those with deep pronounced crests and troughs. Trending prices tend to distort signals and overbought oversold indicator because readings will be skewed off-center from a neutral reading of "50".
Very basically, "buy" signals are considered to be readings of 30 or less (the security is considered oversold) and "sell" signals are considered to be RSI values ​​of 70 or greater (the security is considered overbought). Depending on the technician and price volatility, there are various other qualifications and nuances that can be incorporated into the signal. For example, in very volatile markets, the limits of 20 and 80 can be used to judge and overbought oversold conditions.
Another aspect of this indicator is commonly varied is the period in which the indicator is calculated. Bum started with 14 periods, but other values ​​are common (eg, 9 and 25).