The Relative Strength Index is based on whether shares of a company’s stock are considered to be in overbought or oversold territory, so it can help alert traders to potential buy and sell signals. But for valid RSI signals you have to be sure there’s enough daily trading volume in the stock your trading. That’s pretty much true when trading any penny stock.
The RSI indicator programs a dynamic line line that oscillates between 0 and 100, generally when the line breaks above 70 shares are considered overbought, and below 70 shares are oversold. Nothing works 100 percent of the time but the RSI can help determine if the stock’s nearing the end of a trend, or getting ready for a pullback or a rally off a recent low. There is no Holy Grail indicator for day trading penny stocks or investing in them, so I wouldn’t use the RSI to try and pick tops and bottoms, but in the right context it can be useful.
- This reply was modified 1 year, 6 months ago by marcus.