RSI

Relative Strength Index, or RSI, compares the strength of price-positive days over a given period to the weakness of price-negative days. This calculation is displayed as a single, smooth oscillating line below the price chart. RSI is plotted on a fixed scale, ranging between values of 0 to 100. A reading above 70 is considered overbought and a reading below 30 is considered oversold. When RSI indicates that the currency is overbought, this is a signal for traders to enter a short position. Conversely, when the RSI indicator enters the oversold zone, this signals traders to enter long positions.

Because of the manner in which RSI is calculated, sharp price changes from a single bar minimizes whipsaw, making a valid RSI reading fairly certain. The most commonly used values for RSI are 9 periods, 14 periods, and 28 periods.


RSI