Relative Strength Index
What is the Relative Strength Indicator (RSI) in trading?
The RSI is a relative strength oscillator that uses the speed (momentum) and degree (change) of price changes to generate its indicators. Its value varies between 0 and 100 and is employed to uncover overbought and oversold situations in the market.
Indicate the method that is used for the RSI calculation.
The RSI is determined through the mean of the average gain and the mean of the average loss over the period specified, which is usually 14 days. This formula means we have to divide the average gain by the average loss and then convert the answer into an oscillator ranging from 0 to 100.
Why is RSI important for traders?
RSI is one of the essential technical indicators to traders for not just identifying quick reversals but also for trend confirmation, signal generation, and risk management purposes.