Relative Strength Index (RSI)

The RSI was invented by J. Welles Wilder in the late seventies. It measures the momentum of the price. When it is increasing, the bulls are taking over the market. If it decreases, the bears are in charge. The RSI can be used in different trading styles and for various purposes. Usually, traders all around the globe use the indicator by defining overbought and oversold zones. Overbought zones are identified as areas where the price has risen a lot in a small interval of time. Then, suggesting that the price is overbought and that it can have a trend reversal or correction. Therefore signaling a sell point. Oversold zones are the other side of the currency. They are areas where the price has decreased suddenly in a relatively small period of time. They are usually interpreted as buy points since the price is likely to go back up.



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