The Relative Strength Index - RSI was developed by J. Welles Wilder, is a momentum indicator that measures the speed and change of price action. RSI ranges from 0 to 100. According to Wilder, RSI is considered overbought above 70 and oversold below 30. In addition, RSI can be used to identify divergence signals. Level 50 on the RSI is often used to determine a trend change.

The cycle of the RSI depends on your trading style. The default setting for RSI is 14. This is also the setting that many traders use. But that doesn't mean this RSI cycle is suitable for all trading strategies.

If you are an intraday, short-term trader, the RSI 14 sometimes turns out to be inappropriate. The more suitable cycle is RSI 10. The signals above the lower RSI will provide oversold information for more timely short-term trading. RSI 10 means you will look at the signals that RSI has provided in the previous 2 weeks (equivalent to 10 trading days).

If you are a longer trading trader then you will need a higher period of RSI, so the signal will be less noisy.

The sensitivity of the momentum indicator depends on the cycle you choose to consider. You will see, RSI 10 is more sensitive than RSI 20. That is, RSI 10 will generate more oversold signals than RSI 20.

RSI 10 will also go above or below the 50 levels more often than RSI 20. It shows that a trend change on the lower timeframe is more frequent than the larger timeframe. Conversely, RSI 20 crosses the 50 lines less, which identifies larger periodic RSIs to help you see the overall trend.

Momentum will favor an uptrend when RSI is above 50 and vice versa, momentum will favor a downtrend when RSI is below 50.

The chart above shows the 10, 14, and 20 cycle RSI. As can be seen, the RSI moving pattern of the cycles is almost identical to each other. The biggest difference between the cycles on the RSI indicator is that the amount of RSI goes above 70 (overbought) and over 30 (oversold) as well as a quantity above 50 (a change in trend).

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