Q. What is RSI?
A. RSI stands for Relative Strength Indicator.
RSI was developed by J. Welles Wilder. Relative Strength Index (RSI) is a momentum
oscillator that measures
1. The speed and change of price movements.
2. Strength of stock trend and helps to predict their reversals.
ANS-It already in all softwares of all brokers.
A. RSI value oscillates between 0 to 100.
As per Wilder,
RSI value is > 70: overbought
RSI is <30: oversold.
Dr Ram uses 80/20 values to define overbought and oversold. RSI above 80 is overbought and below 20 is oversold.
You can take contrarian position. E.g. If Stock is oversold you buy it. Trend may reverse and you can gain.
If Stock is overbought you sell it. Trend may reverse and you can gain.
Kindly note that stock may remain for long period in overbought state also and reversal
may not happen. Hence we need to use other indicators along with RSI.reversals.
A. When share price drop suddenly it enters in oversold region. (RSI <20)
If share price increase suddenly it enters overbought region. (RSI >80)
A. A divergence is formed when
a. In a downtrend, RSI is making higher high and higher lows while price is making
lower high and lower lows.
b. In an upward trend, RSI is making lower high and lower lows while price is
making higher high and higher lows.
When you cant draw trendlines there is no divergence
A. First step is to identify which share you want to buy. If you are long term investor then
you must choose fundamental parameters like MPTDS..
A. Standard is 14.
If you use 20 days then RSI increase specificity which is good for long term investors
A. Standard is 14.
A. In uptrending market price goes higher high and higher low..
price goes up and up
These are just levels on graph which are self explanatory
A. Not much
A. In trending market: Use Overlay indicators – Moving Average, Ichimoku, Supertrend and
In sideway market : Use oscillators- RSI, Stochastics, MACD
No, RSI is not a lagging indicator. It is useful for BOTH traders and investors.
Traders and investors are same only difference is TIME frame.
Investor use EOD charts while traders use smaller timeframe charts depending on their
duration of trade.
The following indicators are useful to confirm trend:
A. 1 min,5 min,10 min
A. Buy is better option.
Because Waiting needs patience and many times you miss opportunity.
Atleast you can buy some quantity at 40 and add more quantity when RSI goes <20/30.
A. You need to look at market sentiments also.