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The Relative Strength Index, or RSI is among the most popular indicators used by traders. The RSI provides information about the strength of the price movements on your charts, hence the name. In this article, we will learn what the RSI really does, how to understand the information it provides and how to use it in our trading.
The introduction – Understanding the RSI indicator
The standard setting for the RSI is 14 periods which means that the RSI evaluates the last 14 candles, or time periods.
The RSI compares the average gain and the average loss and analyses how many of the past 14 candles were bullish versus bearish and it also analyses the candle size of each candle.
For example, if all 14 price candles were bullish, the RSI would be 100 and if all 14 price candles were bearish, the RSI would be 0 (or relatively close to 100 and 0). And an RSI of 50 would mean that 7 past candles were bearish, 7 were bullish and the size of the average gain and loss was equal. The more candles ...
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