How To Use The Relative Strength Index
One of the most useful tools employed by many technical commodity traders is a momentum oscillator which measures the velocity of directional price movement.
When prices move up very rapidly, at some point the commodity is considered overbought; when they move down very rapidly, the commodity is considered oversold at some point. In either case, a reaction or reversal is imminent. The slope of the momentum oscillator is directly proportional to the velocity of the move, and the distance traveled up or down by this oscillator is proportional to the magnitude of the move.
The momentum oscillator is usually characterized by a line on a chart drawn in two dimensions. The vertical axis represents magnitude or distance the indicator moves; the horizontal axis represents time. Such a momentum oscillator moves very rapidly at market turning points and then tends to slow down as the market continues the directional move. Suppose we are using closing prices to calculate the oscillator and the price is moving up daily by exactly the same increment from close to close. At some point, the oscillator begins to flatten out and eventually becomes a horizontal line. If the price begins to level out, the oscillator will begin to descend.
Read more here
quiso aparecer nomas.