Relative Strength Index (RSI) November 30, 2013 at 10:00pm
Lesson # 1 We all are here for stock business; we all want to be gainer in our every traing! "sn#t it$ %ut, is it possible to be winner for every trae$ &bviously no! We go through our traing basically through our self' knowlege, e(perience, observing price action, value, )* an +* of a stock before our traing! We try our best to be winner! ost of us want to learn )echnical *nalysis -)*. to get the ma(imum profit in our business! )* is a big worl, you nee to spen a lot of time to stuy it! )here are some technical inicators, which we use in our )* stuying an the /" is one of the most popular inicator! We will learn etails about /" insha *llah! )oay, " will show you, what is the /" an why o we use it an how to take avantage using this tool! et#s make us familiar with /"have a look:
Introduction: )he /elative trength "ne( -/". inicator was evelope by ! Welles Wiler, r! who introuce it along with a few other inicators -*)/, 4arabolic */ an the 5irectional ovement 6oncept. in his book, 7New 6oncepts in )echnical )raing ystems7 in 189!
The RSI is a momentum oscillator. It measures the speed and change of price moveme nt as it oscillates betwee n 0 and 100. According to Wilder, an RSI reading of less than 0 is oversold while a reading of more than !0 is overbought. )he /" is very popular traers&verbought because itan canoversol be use in many aways to generateamong trae signals! conitions, 0 level crossover, an ivergence can be use as signals! *s always, one of the best ways to use the inicator is ientifying ivergence, which is a very powerful signal of price reversal! We will talk more about the uses of the /" in a bit!
Definition of Terms & Related once!ts: "n or er to ai our learning process, it is important to ientify an efine some terms an concepts relate to the /"! )he Relative Strength Index (RSI) is a technical inicator that measures the spee an change of price movement by comparing a security#s gains to its losses an plotting that on a 0 to 100 scale!
Divergence occurs when the price of a financial instrument an the value of an inicator move in opposite irections! )raers observe the market for any occurrence of ivergence, which inicates changes in tren irection! "n the image below, )renline 1 an 2 are forming a %earish 5ivergence! 4rice forms higher highs while /" forms lower lows! * break in )renline = will be a possible entry or, )renline 3 for a more conservative approach!
When the price of an asset is unable to fall below a certain price for a perio of time, that level is calle Su!!ort! 6onversely, when the price fails to climb higher than a certain level for a perio of time, that level is calle Resistance! >owever, with regars to the /", Wiler points out that support an resistance in the inicator is e?uivalent to trenlines on the price chart! * To! is consiere the highest price a specific asset can reach an is usually followe by a ecline of price to reverse to the owntren! &n the other han, a 'ottom is the lowest price that an asset can reach before it shifts upwar to begin a new uptren! >ave a look at the e(ample below! Notice how the price broke the support level on the /" when it broke the trenline on the price chart! *lso, the e(trem e points are the top an bottom! 4rice reache its )op before it broke the trenline an continue going own!
4lease go through the lesson again an again to learn in better way! "n our ne(t lesson, we will learn, how to interpret with /" for our traing benefit!
Than"s and Regards for #our concentration.
/ashebg 30 November 2013
