Modern Techniques to Improve Technical Analysis
Using a New RSI Technique to Improve Trading Signals
RSI techniques are numerous and they improve the way we use it. This article discusses the range reversal technique, a new way of validating the RSI’s signals.
Quick Introduction to the RSI
The relative strength index (RSI) is a widely used momentum oscillator that plays a pivotal role in technical analysis, helping traders and investors assess the strength and potential direction of price movements in financial markets. Developed by J. Welles Wilder Jr., the RSI has a rich history dating back to the late 1970s and has become a fundamental tool for market analysis.
The RSI is primarily calculated using two key components: the average gain and the average loss over a specified period. Wilder’s original formula for the RSI involved a 14-day lookback period. The formula is a complex one, but it essentially normalizes price movements to a scale of 0 to 100, with readings above 70 indicating overbought conditions and readings below 30 suggesting oversold conditions.
