Some market participants find it difficult to correctly read the market and draw profitable conclusions by analyzing the current price behavior. If you belong to the same group of people, this article will be useful to you, because we will present in it RSI indicatorR. And he, as you know, helps to accurately enter the market, taking into account the oversold and overbought areas.
After reading the description of the relative strength indicator RSI and with its criticism, you will be fully armed.
Description of the relative strength indicator RSI
The Relative Strength Indicator or RSI is known among many traders as a momentum-based oscillator. It is used to measure the turnover and the amplitude of specific changes in the price of an investment asset.
RSI indicator traders describe it as a visual way to analyze the current or past historical strength or weakness of a particular segment of the financial market. This tool works based on the cost of closing a trade during a specific timeframe, creating a specific metric of all changes in momentum or price.
The indicator is able to work effectively on stock indices and, of course, in the case of the resulting derivatives.
Throughout its existence, the RSI indicator has been recognized as one of the most powerful tools for analyzing price movements.
Criticism of the relative strength indicator RSI
In addition to the instructions for use and step-by-step adjustment, the trader needs to know for what a particular technical indicator is criticized in order to understand what to expect from it.
Despite the possibility of forecasting RSI indicator may be late with its indicators. In fact, this is typical of many technical analysis indicators.
The relative strength indicator is able to identify oversold or overbought zones and give the trader a signal of a potential change in price. Experienced traders recommend combining RSI with other indicators.
To be more specific, the relative strength indicator is criticized for the fact that during a flat or calm in the market, it gives signals that are slightly above or below the signal levels themselves, which adversely affects transactions.
RSI is also criticized for the fact that its algorithms lack the analysis of powerful price fluctuations.
Summing up, I would like to emphasize that when using the indicator of relative strength, it is necessary to take into account delays and the lack of the necessary response to serious price fluctuations. It is best and most profitable to combine RSI with other technical analysis tools.