RSI

The speaker provides an explanation on how to trade the RSI, or relative strength index.  This technical oscillator fluctuates above and below the 0 line and indicates strength or weakness.  This indicator is best described as indicating the momentum of a particular stock.  The formula compares the size of recent gains against the size of its recent losses. 

70 is typically considered an extreme reading to the upside while 30 is considered an extreme reading to the downside.  There are several different ways traders use the RSI.  Traders will look to trade a reversal long when the RSI breaks 30.  Many traders will look for RSI divergences to setup to initiate a long or short position as well.  RSI divergences occur when prices continue to move higher but the RSI readings do not. 

Finally, traders sometimes use the centerline crossover technique which is less reliable than the other two.  A cross above the 50 line, it is considered to be a bullish sign while the opposite can be said when it crosses below the 50 line. 

The video discusses how to use the RSI, or relative strength index, to improve trading results.  The RSI was developed in 1978 to measure if a stock is overbought or oversold.  It measures the magnitude of a pairs recent gains compared to its recent losses.  This analysis is converted into a number which oscillates between 0 and 100. 

The most common time period used for time analysis is 14 periods.  This speaker believes that an overbought reading occurs between 70 and 80 while an oversold reading occurs between 20 and 30. 

The main strategy used to trade this indicator is to wait for a move above or below an overbought or oversold level and then to wait for it to cross back below or above the midpoint (50).  This could signal a change in trend. 

He also looks for RSI divergence, which occurs when price is moving in the opposite direction from the RSI.  This is key in discovering changes in trend. 

The video provides an overview of what the RSI is and how to trade it.  The RSI, or relative strength indicator, is a lagging momentum indicator and compares the magnitude of the recent gains versus the recent losses.  It attempts to indicate whether a security is overbought or oversold.  Typically, when the RSI is below 30, it is oversold while a move above 70 may indicate that it is overbought. 

The speaker believes that the most powerful application of the RSI is to look at divergences between RSI and price.  He walks through a few chart examples and illustrates how to apply this indicator