Relative Strength Index

Relative strength index, or RSI is an indicator used to measure market saturation. RSI has a scale of 0 – 100. According to the maker, the market is said to be saturated buy (overbought) if its worth the RSI above 70. Saturated and sell if worth under 30.

The use of RSI can not stand alone, but uses other tools such as candlestick. Overbought conditions or oversold market potential to reverse direction. So the function could be said also as the RSI signal for a reversal in the direction of the market.

 

When we are using RSI, trading pointnya entry is:

• Buy when the market appears oversold and candle type of reversal such as inverted hammer, hammer or candle piercing.
• Sell when the market is overbought accompanied the appearance of candle type of reversal such as Shooting star, the hanging man, and others.

It should be noted that if we are using RSI as determinant condition for a reverse direction, use only when the market is sideways.

In addition to the two entry point above, RSI can also stand alone as a signal to the opening position, i.e. only if there is a convergent or divergent. Like this:

 Convergent is a condition where the graph is moving lower than previously but are not followed by down trend oscillator lines indicator. Whereas in normal conditions, movement between graphs and indicators of direct hand in it. So when the directions are no longer hand, this seems to occur irregularities and anomalies.

The Divergence can be defined the direction of the trend in the opposite direction of the trend chart on MACD or as a simple candle (line chart) while in the down trend indicator MACD has shows direction (up), as well as vice versa.

In conclusion, the Convergent could be interpreted any attenuation or increase in prices which ultimately does not match the chart because the lowest and highest points are different. So too on the fundamental differences are divergent on signal indicators are rising while the chart is being dropped or vice versa.