Relative Strength Index (RSI)

Nowadays, it is considered to be the most popular oscillator.

RSI = 100 — (100 / (1 + U / D))

where
U — average value of the positive price changes over a period;
D — average value of the negative price changes over a period.

Relative Strength Index (RSI) signals:

• If the indicator is below the 50 line, then the market is considered to be bearish, if above the 50 level - bullish;
• Bullish divergence / bearish convergence – the main signal of the trend weakness and possible reverse;
• Under flat conditions exit from the overbought (oversold) area is a signal to sell (buy);
• Moreover, different types of the trend analysis can be used to analyze Relative Strength Index (RSI): trend lines, support / resistance levels, chart reversal and continuation patterns.