If the value is above 70, then the asset that a trader is planning to buy currently is overbought. The trading tools supporting RSI indicators will have an area where the number value of an asset’s current RSI is displayed. X = Usually will be 14 days, but can use any value of your choice. RS = Average of X periods closes up / Average of X periods closes down The equation divides the average gain of the asset’s price by the average loss during the given period and then shows the value on a scale of 1-100. This will vary as per the time frame selected like 14 days on the daily chart, 14 hours on hourly charts, and so on. Usually, the RSI calculates the average of an asset’s price over 14 periods. The RSI is a mathematical equation applied on the basis of average gain and loss for a specified period of time. The whole exercise may sound easy, but requires a certain amount of analytical skills and experience to use it effectively. This allows the trader to determine when is the right time for buying and selling.
It helps the trader to identify whether the asset has been overbought or oversold in the current market conditions. The Relative Strength Index (RSI) is a momentum indicator by which a trader can measure the recent changes in the market price of an asset.
