The Relative Strength Index (RSI) is the measure of overbought and oversold conditions. The RSI indicator provides investors a way to identify a security or index that might be reversing direction. When the RSI is above 70, it signals an overbought condition, indicating that an investor should be aware and be ready to close long positions or establish downside protection. As the RSI goes through 70, it provides an investor a fresh sell signal.
An RSI below 30 indicates an oversold condition. It is now acting as a warning that the market is oversold and maybe presented with a fresh buy signal. As the RSI goes above 30, investors who are short may want to add protection or even reverse current positions. This is especially true if the long-term trend is bullish.
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Greg Perlin
Senior Commodities Broker
Greg is a former Chicago Board of Trade member. He was an independent floor trader, pit broker and floor broker with Cantor Fitzgerald. Some of his clients included traders from Morgan Stanley and Lehman Brothers. He also acted in the capacity of desk manager for the morning trade desk. Greg was part of the elite Lind Plus Division for 10 years before joining RJO Futures in 2011..... Read More
