Relative Strength Index (RSI)

Posted on July 12th, 2008 by admin, under forex indicators.

Currently relative strength index (RSI) is one of the most popular technical Forex indicators, which is sold in virtually every software product on technical analysis. This is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula: RSI = 100 – (100 / 1 + RS), where RS is average of x days’ up closes divided by average of x days’ down closes.

This is an extremely useful and popular dynamic oscillator. When you have or want to buy the stock, which showed a breakthrough, make sure it goes ahead the market. The relative strength index will help you identify it by comparing its performance with a benchmark - S&P 500. When the action explodes and climbs to new maximums, it is necessary to the line RSI grew together with it, if not before it. However, if the relative strength line is not able to show the new maximum, when the share of turn off a foundation, breakthrough will be false.

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