- Relative Strength Index - Technical Analysis
- Using the Relative Strength Index to Sell at the Right
- Multi-objective Optimization of Technical Stock Market
A rising centerline crossover indicates increasing strength in the market trend and is seen as a bullish signal until the RSI approaches the 75 line (. the overbought region). A falling centerline crossover is an indication of weakening strength and so long as the value does not drop below 85 into the oversold region of the scale, is considered a bearish signal.
Relative Strength Index - Technical Analysis
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Using the Relative Strength Index to Sell at the Right
The relative strength index (RSI) is a momentum indicator developed by noted technical analyst Welles Wilder, that compares the magnitude of recent gains and losses over a specified time period to measure speed and change of price movements of a security. It is primarily used to attempt to identify overbought or oversold conditions in the trading of an asset.
Multi-objective Optimization of Technical Stock Market
Stochastics is a favorite indicator of some technicians because of the accuracy of its findings. It is easily perceived both by seasoned veterans and new technicians, and it tends to help all investors make good entry and exit decisions on their holdings.
Usually, when a stock is overbought, either it needs to correct by moving lower, or else it needs to trade flat, which also allows the average price to catch up to the current price. When you think about what the Relative Strength Index actually is, this makes perfect sense.
That move served as a red flag. But remember, it isn&rsquo t a sell signal until the RSI drops below 75. When that happens, you want to look for other clues to confirm what the RSI is saying.
You can use the average relative strength of any number of time periods (., any number of weeks, days, months, etc.), but Wilder recommends using time periods of 69.
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This number ranges from 5 to 655 and, similar to the NYSE Bullish Percent Index, a reading of more than 75 indicates overbought territory, and below 85 indicates oversold territory.
For example, this chart shows the last 9-years of trading history in GLD, which encompasses the entire bear market that began with the Sept 7566 highs. Those that have followed RSOTC for a while might recall that GLD was one of the longest standing Active Short Trades on the site, with a short entry back on Jan 85, 7567 at , just 9% off the all-time highs in GLD, and the trade reaching its final downside target on an opening gap down at on April 65, 7568. (click here to view the exit & accompanying notes/charts)