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RSI miniThe Relative Strength Index (RSI) is a popular technical analysis tool used to evaluate the momentum of price movements in financial markets. It helps identify potential overbought or oversold conditions in an asset's price. The RSI oscillates between 0 and 100, with readings above 70 typically indicating overbought conditions and readings below 30 suggesting oversold conditions.

Key aspects of the RSI indicator:

Momentum Oscillator:

The RSI is a momentum oscillator, meaning it measures the speed and change of price movements.

Overbought/Oversold Levels:

Traditionally, an RSI reading above 70 suggests that an asset's price may be too high and potentially due for a pullback, while a reading below 30 suggests the price may be too low and due for a bounce.

Neutral Zone:

The area between 30 and 70 is often considered the neutral zone.

Divergence:

RSI can also be used to identify divergences between price action and the indicator itself, which can signal potential trend reversals.

Formula:

The RSI is calculated based on the average gains and losses of a security over a specific period (usually 14 periods).

Applications:

Traders use the RSI to confirm trends, spot potential reversals, and identify overbought or oversold conditions.

Customization:

Traders can adjust the RSI's period and levels (e.g., changing the overbought/oversold levels from 70/30 to 80/20) to suit their trading strategies.

Limitations:

The RSI is not a foolproof indicator and can generate false signals, especially during strong trending markets.