History

The Relative Strength Index is one of the most popular technical analysis tools in existence across all markets. It was invented by a famous market technician named Welles Wilder, Jr. and first published in his 1978 book, New Concepts in Technical Trading Systems.

Features

The RSI is an oscillator that is plotted on a vertical scale from 0 to 100. Readings below 30 indicate that the market being measured is oversold and possibly due for a bounce, while readings above 70 indicate a market is overbought, and perhaps due for a correction.

Time Frame

Traders use the RSI on almost every conceivable time frame, from very short-term intraday charts to monthly charts. The RSI itself can be configured to measure almost any time period, from the last 30 minutes to 30 weeks.

Theories/Speculation

Although an oscillator, some traders also use the RSI to gauge the strength and trend continuity of the stock they’re analyzing by looking for positive or negative divergences. A negative divergence is formed when a stock price makes a new relative high without the RSI making a corresponding high, while a positive divergence is formed when the RSI makes a new relative high before the stock price.

Warning

Resources

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