RSI Indicator – A Guide to Relative Strength Index: Meaning, How To Read RSI?
The RSI indicator is one of the most popular and well-known trading indicators out there. It’s used by many to analyze the markets in search of profitable entries and exits. Before going any further, let’s just define what RSI is.
Relative Strenght Index (RSI) is a trading indicator developed by J. Welles Wilder in the 70s. It’s a momentum oscillator that measures the rate of change of up days and down days. The RSI then outputs a value of 0 – 100, where high values are considered overbought, and low values are considered oversold.
In this guide, as with everything we do at The Robust Trader, we aim to give you the most comprehensive and detailed guide possible. We are going to cover the basics of the RSI indicator, but also what we have found in our own testing. As a matter of fact, we disagree with the default settings for the indicator, and strongly recommend other settings that repeatedly have proven themselves superior!
We will also cover some RSI trading strategies that we have backtested. Many trading sites tell you that they have a trading strategy, but only present some made-up examples. At the Robust Trader we have more than 20 years of experience in designing trading strategies that work, and we can say with certainty that very little of what you are presented with works! In this guide, we aim to be one of the very few sources that provide some real RSI strategies that work!
We will delve deeper into this discussion later, and it’s something that we urge you don’t skip! Reading and understanding what we are going to share with you will certainly put you ahead of most aspiring traders!
Let’s begin by having a look at the basics of the RSI indicator!
Who invented the RSI indicator?
RSI was invented by J. Welles Wilder and introduced in his book New Concepts in Technical Trading Systems, which was released in 1978. Since then, it has grown in popularity and become one of the most recognized, and in our opinion, useful technical indicators in the trading industry. Since then there have also been several spinoffs, like the Connors RSI, which we will also take a look in just a bit!