Scribd
Upload
29 views3 pages

Other Indicators

goo

Uploaded by

drsumitpuri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
29 views3 pages

Other Indicators

goo

Uploaded by

drsumitpuri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Momentum Indicators – Indicate the RATe of stock price increase or decrease.

They include

relative strength index (RSI)

moving average convergence divergence (MACD).

Momentum is far more useful during rising markets than during falling markets

The relative strength index was created by J. Welles Wilder Jr. in the late 1970s;
On a chart, RSI assigns stocks a value between 0 and 100. Once these numbers
are charted, they can be compared to thresholds to see if the stock is oversold or
overbought

KEY TAKE AWAYS

 The relative strength index (RSI) is a popular momentum oscillator

 signals about bullish and bearish price momentum,

 It is often plotted beneath the graph of an asset’s price.

 An asset is usually considered overbought when the RSI is above 70 and


oversold when it is below 30.

 The RSI line crossing below the overbought line (70) or above oversold line
(30) is often seen by traders as a signal to buy or sell.

 The RSI works best in trading ranges rather than trending markets.

Other indicators can be used along with RSI to strengthen this conclusion.

To reach the best evaluation, experts generally chart the RSI on a daily time frame
rather than hourly

RSI is a tool to determine low-probability and high-reward setups. It works best


when compared to short-term moving-average crossovers. Using a 10-day moving
average with a 25-day moving average, you may find that the crossovers
indicating a shift in direction will occur very closely to the times when the RSI is
either in the 20/30 or 70/80 range, the times when it is showing either
distinct overbought or oversold readings. Simply put, the RSI forecasts sooner
than almost anything else an upcoming reversal of a trend, either up or down.

the RSI forecasts sooner than almost anything else an upcoming reversal of a
trend, either up or down.

It is important to recognize that many traders view the RSI value of 50 to be


a support and resistance benchmark. If an asset has a difficult time breaking
through the 50-value level, the resistance may be too high at that particular time,
and the price action may fall off again until there is enough volume to break
through and continue on to new levels. An asset falling in price may find support
at the 50 value and bounce off this level again to continue an upward rise in price
action.

It is very common to combine Bollinger Bands with, the Relative Strength Index,
or RSI, to help confirm a trend's relative strength

Generally, when the RSI indicator crosses 30 on the RSI chart, it is a bullish sign
and when it crosses 70, it is a bearish sign. Put another way, one can interpret
that RSI values of 70 or above indicate that a security is
becoming overbought or overvalued. It may be primed for a trend reversal or
corrective price pullback. An RSI reading of 30 or below indicates an oversold or
undervalued condition.7
Steve Nison. "Japanese Candlestick Charting Techniques, 2nd Edition," Page 227.
New York Institute of Finance, 2001.

Overbought refers to a security that trades at a price level above its true (or
intrinsic) value. That means that it's priced above where it should be, according to
practitioners of either technical analysis or fundamental analysis. Traders who see
indications that a security is overbought may expect a price correction or trend
reversal. Therefore, they may sell the security.

The same idea applies to a security that technical indicators such as the relative
strength index highlight as oversold. It can be seen as trading at a lower price
than it should. Traders watching for just such an indication might expect a price
correction or trend reversal and buy the security.

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy