RSI, also known as relative strength index, is one of the best technical indicators used. It indicates when a stock is over sold, which is a good time to buy, and it shows when a stock is over bought, which is a good time to sell. According to some investors, and professors, you should use technical analysis and fundamental analysis together.
In the example below, Apple stock has several buy signals when the Relative Strength Index, RSI, is below 30 then crosses above that point, signaling a buy. This can be seen in the blue circles below.
RSI does the following:
It compares an investments current situation with its own history. It fluctuates between 0 and 100 Readings over 70 are overbought Readings below 30 are oversold It oscillates up and down in a wave pattern One of the best Technical Indicators used by investors
