Relative Strength Index (RSI)
The Relative Strength Index (RSI) is a popular technical indicator used to measure the relative strength of a given cryptocurrency. It was developed by J. Welles Wilder in 1978 and has since been widely adopted by traders and investors alike as an important tool for analyzing market trends and forecasting future price movements. The RSI helps identify potential overbought or oversold conditions, providing valuable insight on when it may be time to buy or sell a particular asset.
The RSI is calculated using the following formula:
RSI = 100 – [100 / (1 + RS)]
where RS = Average gain of up periods during the specified time frame divided by Average loss of down periods during the same time frame
In this formula, “up” periods refer to times when prices have risen from one day to another, while “down” periods refer to times when prices have fallen from one day to another. The length of each period can vary depending on user preference but 14 days is typically used as a default setting in most charting programs.
In addition to identifying extreme levels that could indicate possible overbought/oversold conditions, traders also use the RSI as an oscillator-like indicator with values between 0-100 where readings below 30 suggest that assets are oversold while readings above 70 suggest they are overbought according to some analysts. However, many experienced traders caution against relying too heavily on any single metric such as this one; rather they recommend combining indicators together for more accurate results than any single indicator alone could provide.
