The Relative Strength Index (RSI) is a technical #analysis indicator that appeared in 1978 and was used for predicting the stock market. It has successfully moved into cryptocurrencies and has become one of the most popular among traders.
RSI shows the rate of change in the #price of an asset over a selected period of time. By default, it is equal to 14 days, but the trader can change the settings.
The main uses of RSI:
- Overbought/oversold, when the indicator is close to its high of 100 points or its low of 0 points;
- Divergence/convergence, when the price chart of an asset and RSI are moving in the opposite direction, indicating a possible change in trend.
It is important to remember that the accuracy of RSI prediction depends on its settings, but even so, it does not give a 100% guarantee, just like any other indicator in technical analysis.
KEY TAKEAWAYS
The relative strength #index (RSI) is a popular momentum oscillator introduced in 1978.
The RSI provides technical traders with signals about bullish and bearish price momentum, and it is often plotted beneath the graph of an asset’s price.
An asset is usually considered overbought when the RSI is above 70 and oversold when it is below 30.
The RSI line crossing below the overbought line or above oversold line is often seen by traders as a signal to #buy or #sell .
The RSI works best in trading ranges rather than trending markets.
