The strength index was first used in futures trading. Later, in many chart technical analysis, it was found that the theory and practice of intensity index were extremely suitable for short-term investment in the stock market, so it was used to measure and analyze the stock price rise and fall. Foreign exchange trading is similar to futures trading and stock trading in that the rise and fall of exchange rate ultimately depends on the relationship between supply and demand. Therefore, the strength index is also widely used to analyze the foreign exchange market. Later, investors also made the calculation formula of RSI into a computer program, and the operator can get the value of RSI by inputting the exchange rate data into the computer every day. At present, both the chart analysis of Reuters and the chart analysis of Deli Finance can extract the trend chart of RSI.

The principle of RSI

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 at 80 or even 90, the market is considered to be overbought, 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.