RSI INDICATOR

# 📊 Understanding RSI in Trading

### A Powerful Tool for Market Analysis

## 🔹 What is RSI?

Relative Strength Index (RSI) is a momentum oscillator used in technical analysis to measure the speed and magnitude of price movements.

## 🔹 How RSI Works

RSI is calculated using the formula:

$$RSI = 100 - \left( \frac{100}{1 + RS} \right)$$

where RS (Relative Strength) is the ratio of average gains to average losses over a set period (typically 14 days).

## 🔹 Key RSI Levels

✅ Above 70 → Overbought (potential reversal or correction)

✅ Below 30 → Oversold (potential buying opportunity)

✅ Near 50 → Neutral (market consolidation)

## 🔹 Uses of RSI

- Identifying Trend Strength – Confirms bullish or bearish momentum.

- Spotting Reversals – Helps detect potential turning points in price action.

- Confirming Breakouts – RSI divergence can signal trend continuation or reversal.

- Enhancing Trading Strategies – Works well with moving averages, Bollinger Bands, and volume indicators.

## 🔹 Advanced RSI-Based Trading Strategy

📌 Combine RSI with EMA-20 & MA-200

📌 Set alerts for overbought/oversold conditions

📌 Use RSI divergence to confirm trend strength

📌 Analyze volume alongside RSI for stronger confirmations .

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