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Relative Strength
Index
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Learn
how to effectively use the relative strength index
to help predict market direction.
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The relative strength index is a
useful momentum oscillator. It measures the velocity of
a directional price movement.
When the price of a commodity
moves up or down very rapidly, a change of direction at
some point is imminent. The slope of the RSI is directly
proportional to the velocity of the move, and the
distance traveled up or down is proportional to the
magnitude of the move.
The main way this indicator
triggers a signal is when there is a divergence between
the price of the commodity, and the action of the
relative strength indicator, as seen in the chart below.
One is making higher highs, and the other isn't.
Chart Courtesy Of Commodity Price
Charts
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