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Trading with the RSI indicator and Python
The Relative Strength Index (RSI) is a popular technical analysis indicator that was developed by J. Welles Wilder in 1978. The RSI is a momentum oscillator that measures the speed and change of price movements in a security. The RSI is calculated using a mathematical formula that compares the average gains and losses of an asset over a set period of time.
The RSI ranges from 0 to 100 and is plotted as a line graph. The traditional interpretation of the RSI is that a reading above 70 indicates that an asset is overbought, while a reading below 30 indicates that it is oversold. However, some traders may use different thresholds depending on their trading strategy and the asset they are trading.
The RSI is a versatile indicator that can be used in a variety of trading strategies. One popular use of the RSI is to identify potential trend reversals. When an asset is overbought and the RSI is above 70, it may indicate that the price is due for a correction. Conversely, when an asset is oversold and the RSI is below 30, it may indicate that the price is due for a rebound.
Traders may also use the RSI to confirm a trend. When an asset is in an uptrend, the RSI will typically remain above 50, while in a downtrend, the RSI will typically remain below 50. Traders may use the RSI with other indicators or technical analysis tools to…
