RSI index was first applied to futures trading by Wells Wilde. Later, in many chart technical analysis, it was found that the theory and practice of strength indicators were extremely suitable for short-term investment in the stock market, so they were used to measure and analyze the stock price rise and fall. 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 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.