Relative Strength Index (RSI)
The RSI indicator was developed by J. Welles Wilder in 1978. It basically shows the overbought and oversold zones by price. RSI line; It consists of a line that fluctuates between 0 and 100 and takes values within this range. The region below 30 is considered the oversold region, and the region above 70 is considered the overbought region. The most common use is the 14-period usage, which is also preferred by its developer.The fact that the RSI line is in the oversold zone is a result of a falling trend being observed, decreasing interest and demand for the market, resulting in too many oversold transactions. The next expectation is that the buyers will increase and the price will increase. On the contrary, the fact that the RSI line is in the overbought region is a result of an increasing trend, increasing the interest and demand for the market, as a result of which there are too many buying transactions. The next expectation is that the sellers will increase and the price will decrease.
Relative Strength = Average of Positive Closes[Green Candles] / Average of Negative Closes[Red Candles]
Relative Strength Index = 100 - 100/ 1 + Relative Strength
When the RSI line falls below 30, that is, when it enters the oversold region, it is interpreted as a possible buy signal by interpreting that the current price movement will change direction.
When the RSI line rises above 70, that is, when it enters the overbought region, it is interpreted as a possible sell signal by interpreting that the current price movement will change direction. An upward crosses of the 30 band of the RSI line is interpreted as a buy signal, and a downward crosses of the 70 band is interpreted as a sell signal.
The 50 band is considered as equilibrium and it can be positioned towards the intersection of this band.