RSI (Relative Strength Index)

This indicator is frequently used in the forex market. We are not going to get bogged down into fancy mathematical formulas, but suffice it to say that it’s a way to measure the ratio of upward moves to downward moves. The index is expressed in a range of 0-100 similar to the Stochastic Oscillator. To get a trading signal you would want to see whether the RSI is above 70 or below 30. When it is above 70, the market is overbought (too many traders have bought too much of a particular currency pair). Conversely, if the RSI shows 30 or less, that’s a signal that the currency pair may be oversold.

RSI indicator