The Relative Strength Index (RSI) was proposed by Welles Wilder and was initially used in futures trading. Later, people found that the indicator was also very effective when used in the spot gold market, and its characteristics were Through continuous induction and summary, it has become one of the most widely used technical indicators in the market.
We know that investors’ buying and selling behavior is a reflection of various factors. Changes in the market ultimately depend on the relationship between supply and demand. RSI is based on the principle of supply and demand balance by measuring the total increase in gold prices within a certain period as a percentage of the total change. The percentage of the average value is used to evaluate the strength of the long and short forces and then prompt specific operations.
The application rules of RSI include various judgment principles such as crossover, numerical value, form and divergence.
The RSI value divides the range from 0 to 100 into four areas from "very weak", "weak", "strong" to "extremely strong". "Strong" and "weak" use 50 as the dividing line, but the boundaries between "extremely weak" and "weak" and between "strong" and "extremely strong" will change with the change of the RSI parameter. Different regions are divided differently. Generally speaking, the larger the parameter, the closer the dividing line is to the center line 50 and the farther it is from 100 and 0. However, it should generally fall within the range of 15, 30 to 70, 85.
If the RSI value exceeds 50, it indicates that the spot gold market has entered a strong trend, and investors can consider buying. However, if it continues to enter the "extremely strong" zone, it is necessary to consider that things will reverse at the extreme and prepare to sell. The same is true for RSI values below 50. If it enters the "extremely weak" zone, it means that the market is oversold and investors should wait for opportunities to buy.