| Relative
Strength Index - RSI |
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A
technical analysis indicator that compares the days that a stock finishes
up against when it finishes lower.
The RSI ranges from 0 to 100, but a stock is considered overbought
if it reaches the 70 level and you should consider selling. When the
market is a true bull market then 80 might be a better level since
stocks often trade at higher valuations. Likewise if the RSI approaches
30 it is a strong buying indicator and 20 in a strong bear market.
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The
RSI is a big tool in momentum trading. The RSI can help you make so
serious money, but be forwarned that it isn't a decision maker. Big
surges and drops in stocks will effect the RSI, but it could simply
be just a false buy or sell. The RSI is best used as a valuable compliment
to your other stock picking tools.
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