J.Weller Wilder in 1978 developed the relative strength index as a technical tool which analyzes economic markets, and it is among the popular indicators available to traders. The relative strength index works as a momentum oscillator which identifies overbought and oversold conditions in the market. The RSI momentum oscillator deals with the speed and rate of change in price movements within the market. Relative strength index is one of the most popular indicators among traders. It is comfortable for use both individually and in combination with other traders.
How to use the relative strength index?

How Does It Work?
If the overbought value gets closer to 100% or the oversold value gets closer to 0%, then the signals become more precise although the quantity decreases. That moment when the indicator intercepts on a higher level means an oversold case, and when prices are increasing too high and fast soon, they are expected to decline. If the indicator catches on a lower border, it means an overbought case where prices are getting too little too fast, and they are supposed to increase. When the relative strength index indicator trend does not correspond with the pattern on the charts, many traders rely on indicator values, and this case is called divergence.Types of divergence
There are two main types, i.e., a bullish divergence which occurs when the relative strength indicator creates reading followed by a higher low that matches correspondingly lower lows in the price. A bearish divergence which occurs when the relative strength indicator creates an overbought reading followed by a lower high that matches correspondingly higher highs on the price.Calculating The Relative Strength Index.
When calculating the relative strength indicator, one needs a robust and in-depth explanation. Therefore the best way for one to understand the concepts easy, one has to read Wilder’s 1978 book New Concepts In Technical Trading System. This book will give a detailed explanation of the ideas. However, the formula can be simplified as follows: RSI=100-[100/(1+(AVERAGE OF UpWard Price of Change/ Average Downward Price Change)]How does Relative Strength Index work in markets?
