What is the RSI indicator in trading?
Understanding the RSI Indicator in Trading
What is the RSI?
The Relative Strength Index (RSI) is a popular momentum oscillator used in technical analysis to measure the speed and change of price movements. Developed by J. Welles Wilder, the RSI ranges from 0 to 100 and helps traders identify overbought or oversold conditions in a market.
How RSI Works
Typically, an RSI above 70 indicates that an asset may be overbought, while an RSI below 30 suggests it may be oversold. Traders use these levels to make informed decisions about entry and exit points.
| RSI Value | Market Sentiment |
|---|---|
| 0-30 | Oversold |
| 30-70 | Neutral |
| 70-100 | Overbought |
In conclusion, the RSI is a versatile tool that aids traders in recognizing potential price reversals, adding valuable insights to their trading strategy. Understanding its implications can enhance decision-making in volatile markets.
