RSI

The Relative Strength Index (RSI) is a technical momentum indicator that compares the magnitude of a stock’s recent ‘up closes’ (where the price closed higher than it opened) to recent ‘down closes’ (where the price closed lower than it opened). The results are then indexed from 0 to 100. The number of days used in the formula is a matter of preference. The default value for stocks is 14.

The RSI can be used to determine ‘overbought’ and ‘oversold’ conditions. For instance, if a stock’s RSI falls below 30, it could be seen as oversold. But when it breaches an RSI of 70, it could be overbought.

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The RSI can also be used to identify divergence. Divergence happens when a price makes a new high (or low) but the RSI does not reach new highs (or lows). It could be a bearish signal if the price reaches a new high while the RSI does not. Likewise, it could be a bullish signal if the price reaches a new low while the RSI does not.

All aspects of the RSI indicator, including colours, can be customised in the settings modal.

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