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RSI – How to make use of it ?

RSI stands for Relative Strength Index.

It is an oscillator / momentum indicator.

Simply put, it compares the strength of recent gains and losses of an asset.

This is to suggest overbought or oversold conditions for an asset.

The formula is: RSI = 100 – 100/(1+RS)

RS = Average of x period gain closes / Average of x period loss closes

This results in a number from 0 – 100.

Generally, below 30 means oversold and above 70 overbought. Stricter traders use 20 and 80 instead.

However this is not meant to be used alone as fast movements may create fast indications. ( Indicator jumping to over sold or bought )

Combine it with other indicators !

Find below a example of it in use.



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