Relative strength index is the most famous swing index in futures market and stock market. Its principle is to infer the strength of market movement trend by calculating the fluctuation range of stock price, and predict the continuation or turning point of the trend accordingly. In fact, it means that the upward fluctuation range of stock price accounts for the percentage of the total fluctuation range. If the value is large, it means that the market is in a strong state; If the value is small, it means that the market is in a weak position. This is an important index to measure the market, but its function is closely related to the market value of stocks and futures. The fluctuation range of the large market is small, and the fluctuation range of the small market is large. The specific calculation method is: RSI (n) = a/(a+b) × 100%, where a represents the upward fluctuation of the stock price in n days and b represents the downward fluctuation of the stock price in n days. A+B represents the total fluctuation range of the stock price during this period. Application principle: (1) is limited by the calculation formula. No matter how the price changes, the value of the strength index is between 0 and 100. (2) An intensity index higher than 50 indicates that the market is strong, while an intensity index lower than 50 indicates that the market is weak. (3) The strength index fluctuates between 70 and 30. When the six-day index rises to 80, it means that the stock market has been overbought. If it continues to rise and exceeds 90, it means that it has reached the warning zone of serious overbought, and the stock price has formed a head, which is likely to reverse in the short term. (4) When the six-day strength index falls to 20, it means that the stock market is oversold. If it continues to fall below 10, it means that it has reached a serious oversold area, and the stock price is likely to stop falling and rebound. (5) The oversold and overbought value of each type of stock is different. In a bull market, blue chips are usually overbought when the intensity index is 80, oversold at 30, oversold when the intensity index is 85-90 and oversold at 20-25. But we can't judge whether blue-chip stocks or second-and third-tier stocks are overbought or oversold according to the above values, mainly because some stocks have their own overbought/oversold levels, that is, stocks with repeated stock prices usually have higher overbought values (90 to 95) and lower oversold values (10 to 15). As for those stocks with stable performance, the overbought value is low (65 to 70) and the oversold value is high (35 to 40). Therefore, before buying or selling a stock, we must first find out the overbought/oversold level of this stock. As for measuring the overbought/oversold level of a stock, you can refer to the strength index record of the stock in the past 12 months. (6) The scope of overbought and oversold also depends on two factors. The first is the characteristics of the market. Generally, the stable market with little fluctuation can be stipulated as oversold above 70 and oversold below 30. In a drastically changing market, it can be stipulated that more than 80 are overbought and less than 20 are oversold. The second is the time parameter taken when calculating RSI. For example, RSI on the 9th can stipulate that it is overbought above 80 and oversold below 20. For RSI on the 24th, it can be stipulated that it is overbought above 70 and oversold below 30. It should be noted that overbought or oversold itself does not constitute an entry signal. Sometimes the market changes too fast, and RSI will soon go beyond the normal range. At this point, the overbought or oversold RSI often loses its function as an early warning signal for entering and leaving the market. For example, in the early days of bull market, RSI often quickly enters the area above 80 and stays in this area for a long time, but this does not mean that the rising market is over. Instead, it is a strong performance. Only in a bull market or a bear market, overbought is a reliable entry signal. For this reason, once RSI enters the abnormal area, it is generally not appropriate to take trading actions. It is best to trade when the price itself signals a turning point. In this way, we can avoid the "trap" similar to the above-mentioned RSI entering the overbought area but not returning to the normal area immediately. In many cases, a good trading signal is that RSI enters the overbought and oversold area, then crosses the overbought or oversold line and returns to the normal area. However, we still need to confirm the price here before we can take practical action. This confirmation can be as follows: ① Breakthrough of trend line; ② Breakthrough of moving average; (3) the completion of a certain price type. (7) When comparing the strength index with the stock price or index, it often shows the future market trend first, that is, if the stock price or index does not rise, the strength index will rise first, and if the stock price or index does not fall, the strength index will fall first. Its characteristics are most obvious at the peak and bottom of the stock price. (8) When the strength index rises and the stock price falls, or when the strength index falls and the stock price rises, this situation is called "deviation". When RSI is above 70 to 80, the price is broken but RSI can't break it, forming a "top deviation", while RSI is below 30 to 20, the price is broken but RSI can't break it, forming a "bottom deviation". The deviation of this strength indicator from the stock price change is usually a signal that the market is about to undergo a major reversal. Just like overbought and oversold, reverse does not constitute an actual selling signal, but only shows that the market is in a weak position. The actual investment decision should be made after the price itself has confirmed the turn. Although this confirmation process will make investors lose some profits when the market does reverse, it can avoid the wrong selling decision that investors may make when the situation does not reverse later. Relatively speaking, this kind of mistake will cause greater losses to investors, because sometimes the market will temporarily lose power and then regain power, and then the price will not turn on a large scale.