The RSI chart, or relative strength index chart, reacts to the speed and size of change in the asset’s price movements over one-hour, six-hour, and one-day intervals. The chart can display its data across numerous selectable time periods, up to a three hundred and sixty-five-day period if desired.
Clicking on the right-hand side of the chart and dragging the highlighted area the desired number of periods to the left allows further personalisation of the viewing period. This facility allows short-, medium-, and longer-term traders to view the chart within the period they most commonly use.
– Short-term Day traders often set it at a low period, in the range of 9 to 11.
– Medium-term swing traders frequently use the period setting of 14.
– Long term position traders will often use higher settings with periods in the range of 20 to 30+.
The chart incorporates market data from our proprietary data warehouse and is displayed as a line graph chart with a scale of zero to 100, illustrating the relative strength of the asset.
The position of the oscillating line can aid you in identifying whether the asset is regarded as underbought or overbought.
When the RSI reading is 30 or below, it signals underbought; increasing the possibility of a price reversal to the upside. This may appeal to traders looking for an entry.
When the RSI reading is 70 or above, it signals overbought; increasing the possibility of a price reversal to the downside. This may appeal to traders looking for an exit.
A trend reversal may be confirmed when the RSI shows a divergence, where an asset’s price moves one way and the RSI moves in the opposite direction. For example, a bullish divergence occurs when an asset’s price makes lower lows but its RSI chart makes higher lows. This can be a signal that downward momentum is weakening and a bullish reversal may soon follow.