Okay we are going to talk a little bit about the RSI which is the relative strength index which has a scale of zero to a hundred and it’s mainly used as an oversold or overbought indicator. So when the level of the RSI rises above a certain level, generally 70%, then it the stock is considered to be over-bought when the level falls below a certain level, like 30%, then the stock is considered to be oversold. So it’s an indicator that changes over time according to how much buying and selling is going on.
Many people use different numbers than 70% or 30% in order to determine whether a stock is overbought or oversold. For instance, they might decide that 80% means overbought or 20% means oversold but I believe in the long run you will do just as well buying when it’s overbought and selling when it’s oversold as you will trying to look for a reversal when he gets to those areas. There’s another problem with the RSI, which is as is the case with almost all popular indicators… it’s a lagging indicator. So basically it tells you after the fact when something might be happening, if it tells you anything at all.
So my advice to you is to ditch all the indicators and learn to read the order book, learn to read the depth of market, and pay attention to what’s actually going on at the time in the last few seconds or in the last few minutes rather than what’s going on in an indicator like the RSI. Feel free to use it as much as you want and see how it works for you but I think if you keep really good track of it you’ll find out you don’t do any better using it or not using it. I think it’s not a helpful indicator, Okay, that’s it for RSI for right now.