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RSI is called as Relative Strength Index which is actually a Momentum Oscillator. This is used to identify the momentum of the stock which is trading.
Using this oscillator we can identify the overbought and oversold conditions. This oscillator would oscillate in between 0 and 100 range where above 70 or 80 is generally called as OVERBOUGHT signal and below 30 or 20 is called as OVERSOLD signal.
The OVERBOUGHT and OVERSOLD signals can be combined with other indicators to find the BUY and SELL signals.
RSI > 70 or 80 -> OVERBOUGHT (SELL)
RSI < 30 or 20 -> OVERSELL (BUY)
RSI = 50 -> NEUTRAL or RESISTANCE
RSI can be used as in two different ways.
1. Overbought/Oversold – to take BUY or SELL decisions.
2. Divergence to predict the market direction during non trending market.
RSI is relative strength index , which is used in non trending zone ,
If we take price chart and apply rsi we identify 30 mark and 70 mark
when rsi crossed 30 mark then it in buy zone
RSI is relative strength index. lines are drawn on the miniature chart and horizontal lines are drawn on it. If RSI < 70 then short position is executed and if RSI>30 long position is executed.
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