In most stock software, there are some classic indicators, one of which is the relative strength indicator RSI. But for friends who have just entered the market, they simply don't know what the indicator rsi means. Let's take a look at the relevant knowledge. After all, many people don't know its true meaning.

What does indicator rsi mean?

Relative strength index RSI is a technical curve based on the ratio of the sum of rising points and falling points in a certain period, which can reflect the prosperity of the market in a certain period. The analysis index aims to reflect the strength of price trends with three lines. This chart can provide investors with operational basis and is very suitable for short-term price difference operation.

The indicator rsi was first used by WellesWilder in futures trading. Later, in many chart technical analysis, it was found that the theory and practice of strong and weak indicators were extremely suitable for short-term investment in the stock market, so they were used to measure and analyze the rise and fall of stocks.

The principle of RSI is simply to calculate the strength of buyers and sellers through numerical calculation. For example, there are 100 people facing a commodity. If more than 50 people want to buy and compete to raise prices, the price of goods will definitely rise. On the contrary, if more than 50 people compete to sell, the price will naturally fall.

According to the strength index theory, any sharp rise or fall of the market price is between 0- 100. According to the normal distribution, it is considered that RSI values are mostly between 30 and 70. Usually, the market is considered overbought at 80 or even 90, and the market price will naturally fall back and adjust. When the price falls below 30, it is considered oversold and the market price will rebound.

Indicator rsi has the following main purposes:

1, vertices and bottoms 70 and 30 are usually overbought and oversold signals.

2. divergence (or divergence). When market conditions hit a new high (low), but RSI did not hit a new high (low), this usually indicates that the market will reverse.

3. Support and boycott. RSI can show support and resistance, and sometimes it can reflect support and resistance more clearly than the price chart.

4. Compared with the price chart, the price trend patterns such as double top and head and shoulder top are clearer on RSI.

5. When RSI breaks through (exceeding the previous high or low), it may mean that the price will suddenly change, which is the same as other indicators. RSI needs to be used in conjunction with other indicators, and cannot generate signals alone. The confirmation of price is the key to determine the entry price.