Relative Strength Index (RSI) Indicator
The Relative Strength Index Indicator is designed to assess the strength and the weakness of the current price movement. It also analyses any price increases with its losses over a certain period of time and measures the velocity of price change based on the information it gathered.
The RSI identifies possible overbought and oversold areas. Usually, they say the asset may be overbought if the indicator goes over 70, and oversold if it’s below 30.
Two different situations of overbought and oversold shows possible opportunities as well. When crossing the overbought area, the indicator signals a possible sell opportunity, whereas when crossing the oversold area it signals a possible buy opportunity.
Relative Strength Index Indicator Calculation
RSI = 100 – 100/(1+RS)
RS = Average gain / Average Loss