Relative Strength Index

Relative Strength Index

Relative Strength Index
By Ramano Richie

This is one of my favorites. I use this indicator at time scale of 5M, 1H, and 1D. So simple to be used and has helped me to have great result in my trades. You don't even need to be an expert to use this indicator.

This technical indicator was developed by Welles Wilder to help investors gauge the current strength of a stock's price relative to its past performance. The usefulness of this indicator is based on the premise that the RSI will usually top out or bottom out before the actual market top or bottom, giving a signal that a reversal or at least a significant reaction in stock price is imminent.

The main purpose of the RSI is to measure the market’s strength and weakness. A high RSI, above 70, suggests an overbought or weakening bull market. Conversely, a low RSI, below 30, implies an oversold market or dying bear market.

But RSI does not indicate a top or a bottom. Sometimes overbought market will be followed by little downward correction in order to gather momentum so it could go up much further. And sometimes oversold market will be followed by little upward correction in order to gather momentum so it could go down much further.

Click here to read more about this indicator and read other things to win forex trading.

Richie is a forex trader and forex technical analyst.
You may read my articles at:
Forex Library
and my daily technical analysis at my brother's blog:
Brian Signal

Article Source: http://EzineArticles.com/?expert=Ramano_Richie
http://EzineArticles.com/?Relative-Strength-Index&id=212023