DaytradeTeam Profitzzz

Relative Strength Index, or RSI for short, is an oscillator that follows the price of one security and ranges between 0 and 100. Many traders use RSI as part of their trading strategy. One popular method of analyzing the RSI is to look for a divergence in which the stock or index is making a new high, but the RSI is failing to surpass its previous high. Many times, this divergence will be an indication of an impending reversal. When the RSI then turns down and falls below its most recent trough, it is said to have completed a "failure swing." The failure swing is considered a confirmation of the impending reversal. In fact, RSI is one indicator commonly used in our Swing Trading Systems for just that reason.

Forming Tops and Bottoms:The RSI usually tops above 70 and bottoms below 30. It usually forms these tops and bottoms before the underlying price chart. Hidden Chart Formations:The RSI often forms chart patterns such as head and shoulders or triangles that may or may not be visible on the price chart. Breakout Swings:This is where the RSI surpasses a previous high (peak) or falls below a recent low. Support and Resistance:The RSI shows, sometimes more clearly than price themselves, levels of support and resistance.

Divergences:Divergences occur when the price makes a new high (or low) that is not confirmed by a new high (or low) in the RSI. Prices usually correct and move in the direction of the RSI.
Keep in mind that DaytradeTeam never uses just one indicator like RSI to determine where a stock is headed. If used correctly in combination with other indicators, RSI can help you make more profitable trading decisions.