What is the Relative Strength Index (RSI)

En economía there are many indicators that are capable of measuring anything in order to do things well. The next term will help us look at the price of an asset.

Specifically, the acronym RSI refers to Relative Strength Index, or what is the same, Relative Strength Index. This index ranges from 0 to 100 (the latter being its maximum), and measures the strength in which the price of an asset rises or falls in a given period of time.

These indicators are very fashionable now in apps of trading, in which asset prices fluctuate in a higher or lower range. Normally, level 70 is taken to designate an overbought and level 30 for an oversold.

When we talk about overbought it is expected that there will be a bullish depletion of the asset. The opposite happens for oversold, when the price is also expected to rise.

To adjust the RSI we can take several possible ways:

  • If we readjust the calculation period, the indicator will become more sensitive and the faster it will reach extreme levels. It will be less volatile for the case in which the period is longer.
  • Another way to adjust RSI is through price swing levels. If they are spread from 70-30 to 80-20, there will be less variation signals, but at the same time a higher reliability per emitted signal.
  • Custom adjustments can also be made to obtain greater precision in the data that we want to acquire from the purchase and sale of assets, or rather, their price.

This system (RSI) has been acquired by trading apps, so popular lately, in which the investor must see how the prices of the assets with which he trades or in which he has invested vary. However, these indices have also been acquired by computer programs to approximate more precisely the price at which financial assets are placed in the bag and have a smaller margin of error ..

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