Relative Strength Index (RSI) (rsi)
Relative Strength Index (RSI) is a widely-used technical analysis tool that measures an asset's strength by comparing its average gains and losses over a given period.Formula: The RSI formula calculates the upward and downward price movements and adjusts for the asset's volatility over a chosen period, commonly 14 days. This is because a 14-day period is considered long enough to provide enough data for analysis, yet short enough to respond to relatively rapid changes in the market. The end result is a value showing the asset's relative strength, ranging from 0 to 100. The closer the indicator value is to its maximum level, the more overbought the market becomes, and vice versa, the closer it is to its minimum, the more oversold the market becomes.Key Takeaways:1. RSI is mainly used to identify overbought or oversold market conditions, assess momentum, and spot potential reversals in the markets. 2. The indicator is known for its reliability and user-friendliness. It is one of the most frequently used oscillators.Counterarguments:1. RSI can be less useful in trending markets.2. RSI may generate false signals in choppy markets.3. RSI may not be useful when markets are experiencing low volatility.