What Is The Relative Strength Indicator (RSI) Used For When Trading Stocks
So what is the relative strength indicator (RSI) used for when trading stocks?
The relative strength indicator (RSI) is measured on a scale of 0 to 100. RSI measures the relative strength or weakness of a stock compared to itself over a certain amount of time.
Investors will use RSI to determine if a stock is overbought or oversold. Typically if the RSI is below 30 this would indicate that the stock may be oversold. If the RSI is above 70 then this would indicate that the stock may be overbought.
It is also believed that stocks will eventually follow whatever the direction the RSI is moving.
The RSI can give a lot of short term false signals; which will make it difficult to purchase stocks based on the RSI alone.