Learn Forex – Relative Strength Index or RSI
RSI is an indicator of relative strength (Relative Strength Index )
RSI oscillator is the exchange rate to measure the speed at which prices move.
Comes to solve the problems of line momentum. One problem is that a very sharp rise or fall can cause days ago n too many violent movements in the line of momentum, even though current prices do not show excessive changes.
It is therefore appropriate to “flatten” these changes, taking into account that the line failed to provide a momentum band of overbought or oversold. With the RSI are solved these problems.
On the one hand, it offers a measure of the relative strength of gains in prices in relation to loss. Moreover, it allows a comparison of the same value in different periods. This is why we need a measure mormalizada and the RSI is between 0 and 100, which can provide the levels of overbought and oversold.
The formula is:
RSI = 100 – 100 / [1 + (Media upgrades / Media Bajas)]
The relationship between the highs and low gives the relative strength of each value. The RSI can compare the two averages and expressed as a percentage. If the average of low and highs are equal, the RSI has a value of 50%, ie the relative strengths are balanced. However, if the value of the RSI is above 50% means that there is more upward force on bass, and if less than 50% more force on that bullish bearish.
What is commonly used at present is the RSI with average 14 days, as if it were shorter (7 days) can provide false signals and moving averages of 20 days lost signals are produced in a shorter period of time .
The interpretation of the RSI is: Since the IHR is a line that follows the graph will show the maximum and minimum price that is forming. When the RSI line exceeds the 70% is considered that the value entered overbought zone. Conversely, if is below 30% area, it is considered that the value entered oversold zone.
From RSI can also chart analysis, ie, triangles can be detected, supports, resistances, rectangles, etc.. One of the most important is the observation of the differences between the performance of the current market value and the RSI line. For example, if we see a continued rise in price, and on the contrary, we see an acceleration in the RSI is not commensurate with the market value, it would result in a divergence that may show a possible trend of future change in value.
The RSI is popular because it is relatively easy to interpret. It was designed by J. Welles Wilder and Commodities magazine (now Futures) in June 1978 and his New Concepts in Technical Trading Systems the same year.
Oscillators are ratios that are calculated from the movement of the price and tell us if the share is overvalued (and should be thinking about selling) or understated (and it is time to buy).
In its calculation is often used data from 14 sessions, as if it were lower (7) can give false signals and moving averages of 20 signals that are lost are produced in a shorter period of time.
This oscillator is calculated as follows:
RSI = 100 – 100 / [1 + (Media upgrades / Media Bajas)]
The relationship between the highs and low gives the relative strength of each value. The RSI can compare the two averages and expressed as a percentage. If the average of low and highs are equal, the RSI has a value of 50%, ie the relative strengths are balanced. However, if the value of the RSI is above 50% means that there is more upward force on bass, and if less than 50% more force on that bullish bearish.
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