A Powerful Indicator for Smart Trading


One of the most often utilized technical indicators by traders to spot possible trend reversals and price momentum is the Relative Strength Index (RSI). The RSI, which was created by J. Welles Wilder, assists traders in determining if a stock is overbought or oversold by measuring the rate and change of price movements.


RSI works on a scale of 0 to 100.


The stock may be overbought and may soon undergo a price correction if the RSI rises above 70.


The stock may be oversold when the RSI drops below 30, indicating a potential positive reversal.


Why Traders Use RSI


  1. Helps identify entry and exit points

  2. Confirms trend strength

  3. Prevents emotional trading decisions

  4. Works well in combination with moving averages and support-resistance levels



If a stock is trending upward and RSI crosses 70, traders may prepare for a pullback. If the price later dips and RSI moves below 30, it can indicate a good buying opportunity.


Conclusion


RSI is a straightforward yet effective indicator that aids in momentum analysis and decision-making for traders.Accuracy can be greatly increased by mastering RSI, particularly when combined with other technical indications and chart

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