Relative Strength Indictor as a momentum indicator

Relative strength index is a momentum indicator that helps traders to follow the movement of a commodity, currency or stock. In a nutshell, it determines the turning points in the prices of commodities. Traders decide when to enter and exit from the transaction based on this indicator.

RSI helps traders to determine whether a commodity is over bought or oversold. The hourly EURCHF graph is read for predicting a change or alteration in the price. If the price falls below 30, it is oversold, and if it rises above 70 it is said to be overbought. Welles wilder, the developer of RSI stated that the best outcome of RSI line is the deviation of it from the price line. Since, it is a leading indicator it informs beforehand the speculated rise or fall. Professional traders reap the benefits since they get to know if the price will maintain or fall. If RSI line and price line are in tandem, it is a clear indicative that prices will vary.

RSI informs the traders when to trade and when to abhor. Basically it is a prediction of the rise and fall of the prices. It can be effectively used as a guide by the traders!

 

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