Here we have a very popular indicator called Relative Strength Index, or Wilders RSI. Developed by J Welles Wilder, this indicator measures the strength of any stock by using its average net up closing day prices, by its average net down closing process, for the period set.

RSI fluctuates between O and 100, 0= Oversold, and 100 being overbought. It is a leading indicator and can be used to predict future trend changes using positive or negative divergences compared to price.

Divergences are one of the most powerful ways to use most indicators. The fact that it is a leading indicator, as opposed to Moving Averages which are lagging, and can thus indicate future directional changes. Read More→