Indicators
RSI (Relative Strength Index)
A momentum indicator measuring overbought/oversold conditions.
Full Definition
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of price changes on a scale of 0 to 100. Traditionally, RSI above 70 indicates overbought conditions (potential reversal down), while RSI below 30 indicates oversold conditions (potential reversal up). RSI can also show divergences that signal trend weakening.
Example
EUR/USD rallies strongly and RSI reaches 85. This overbought reading suggests the rally may be exhausting and a pullback could occur. However, in strong trends, RSI can remain overbought for extended periods.
Formula
RSI = 100 - (100 ÷ (1 + RS)), where RS = Average Gain ÷ Average LossApply Your Knowledge
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