December 10, 2010 by akhilendra
Relative strength index (RSI)
RSI is an oscillator which is used to measure the technical strength or weakness of a particular stock. It is a technical momentum indicator that compares the magnitude of recent gains against recent losses. They determine overbought and oversold conditions of a scrip.
RSI can be measured for any time frame. Most of the traders use 5 day, 7 day and 9 day RSI for short trading. It ranges between 0 and 100. 70 represents overbought condition and 30 represent oversold condition.
1. when RSI turns 30 after falling below 25, it is a bullish signal.
2. when RSI turns 70 after reaching 80 to 90 levels, it is considered bearish signals.
How to use RSI for trading?
BULLISH SIGNALS
Buy when RSI turns up from its second bottom and place stoploss below last minor low.
BEARISH SIGNALS
Sell when RSI turns down from its second high.
Charting Pattern
1. when RSI break its down trend and start moving up, buy.
2. when RSI breaks its up trend, sell.
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