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Have not heard much about this term, how can I use it to analyze stocks?
Any help greatly appreciated!
Machiavelli
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Sorry Risky.. i would of answered your question 2 days ago but i had problems signing into the bulletin board.. but it seems to be working now.. anyways RSI stands for Relative Strength Index and it gives you a indication if a stock has been overbought or oversold... if it's either or then it will most likely become a "correction" .. if overbought it will go down in price because its overpriced in traders minds so they will take a profit and sell..so the RSI will begin a downtrend.. if its oversold then the price has gone too low and it could be a bargain .. therefore traders will start buying and the RSI will begin a uptrend.. so the way to use it to analyze stocks is if the RSI hits 75 or above then its overbought and you should take partial or all profits because it will correct itself very soon if not later and begin a downtrend in price... if the RSI goes down to 25 and below.. look for it to hook up into a uptrend and buy it at a bargain.. when its between 25 and 75 look for uptrends to make a entry into the stock or downtrends to exit and enter it later when it recovers.. Anyways i hope this answers your question.. let me know if you understood... in your chart options select RSI as one of your Indicators.. I also use the OBV (on Balance Volume) which "indicates" if money is flowing in or out of a stock.. same concept though .. uptrend means price will go up because money is flowing into the stock and downtrend means price will go down because money is flowing out of the stock.. try to use the RSI and OBV when the price isnt moving but the RSI/OBV is... in that case they are giving you a early signal which way prices might or most likely move...
RISKY
posted Machiavelli-
Thanks for the quick lesson, it helped a lot. I did some reading on it, but it was not explained as well as you were able to explain it. I will add it to the charts!
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