✔️ Information reviewed and updated in May 2024 by Eduardo López
Among the many tools available to the world of trading, the RSI divergence indicator has become one of the most widely used technical indicators for both beginners and more experienced investors. Its utility and ease of use makes it a valuable tool when investing in the market.
In this article you can find more information about this important indicator, so don't waste any more time and discover why you should implement it in your next strategies.
➡✨ What is RSI?
One of the most common indicators when working with technical analysis is the RSI indicator, which stands for Relative Strength Index and represents the relative strength index. This oscillator type indicator is responsible for reflecting the relative strength of all bullish movements, comparing them with bearish movements.
It is normally used by traders to be able to measure the strength of a trend and identify end-of-trend signals. The RSI was originally developed by J. Welles Wilder in 1978.
It is responsible for providing valuable market information and above all it gives important trading signals, since it measures the relationship between the upward and downward movements, thus normalizing the calculation that is made so that the index fluctuates in a range from zero to one hundred.
➡✨Divergences
We can say that there are divergences between two elements when the evolution of both is opposite. In this way we can find divergences between two elements when the evolution of both is opposite.. And when we find divergences between a price and an indicator, it is because the indicator is marking the direction. The creation of divergences can be generated almost in any way and between any indicator.
With the RSI, having a single line, a divergence between the price and the indicator can be viewed more easily. By talking about the relative strength of this indicator we can determine the divergences between movement speeds, between the price and its previous periods.
➡✨ Advantages of the RSI divergence indicator
- Some of the main advantages of the RSI indicator are:
- This indicator is characterized by allowing you to see at a glance the behavior of the market, if it is in overbought or oversold areas.
- It is very easy to interpret.
- It allows us to easily identify a trend in the stock market.
- It represents a useful technical indicator in short-term trading, especially for scalping.
- Normally professional traders describe their performance as fruitful, since by combining the RSI indicator strategy with the pivot points, great benefits are obtained.
- This indicator is most often combined with other technical analysis tools, such as the well-known MACD or even stochastic.
The RSI indicator can provide you with information on technical trends, as well as buy and sell signals. So it is crucial that you analyze the trading strategies that implement it.
Strategies with the RSI indicator can complement any other strategy, so we invite you to feel free to try it and practice to achieve your goals.
