![]() We have backtested trading systems for over 20 years and we can confirm that the RSI works reasonably well on stocks and stock indices. In this article, we show you how to use the RSI indicator. But in order to find out if something really has any predictive value, you need to backtest. Most websites present the Relative Strength Index by using anecdotal evidence. The indicator works best on securities that are mean-reverting. Filters or additional criteria are needed in order for the RSI to be used in a trading strategy. However, it works best together with a second indicator or variable. Our research indicates that RSI is one of the most useful indicators for trading strategies. The RSI has become one of the most widely used indicators for traders. Wilder published a book in the same year called New Concepts In Technical Trading Systems (he also published the ADX indicator in the same book, an indicator we will cover later). The Relative Strength Index (RSI) was developed by Welles Wilder and first introduced in a magazine called Commodities (now Futures) in June 1978. ![]() This article looks at how the RSI indicator works and how you can develop an RSI trading strategy.
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