# Foreign exchange technology: how does the relative strength index work?

Foreign exchange technology: how does the relative strength index work? Relative strength index (RSI) - the relative strength of buyers and sellers in a market. It is mainly used to detect overbooking and oversold. Its value is between 0-100. When RSI is between 70-100, it is overbought and can be airdropped; when it is 0-30, it is oversold and can be put more.
(1) RSI calculation formula:
RSI = 100 - (100 / 1 + RS).
The rising closing average value = (uavx (n-1) + m) / n.
The closing average value of decline = (davx (n-1) + L) / n.
UAV - the average of the rising closing price calculated the day before.
Dav -- the average of the closing price of the previous day.
M - the closing price rise of the day (if the price drops, M = 0).
L - the closing decline of the day (if the price rises, l = 0).
N-time interval. RSI usually takes 14 days as a cycle.
However, distortion is inevitable, so it can only be used and cannot be relied on.
(2) The RSI changes were as follows
A. In the process of exchange rate fluctuation, the range of RSI intervention is between 30-70 in most of the time, and 40-60 is the most.
B. When the exchange rate fell for a period of time, the RSI also dropped from a high level to below 30.
C. When the exchange rate rose for a period of time, the RSI also rose from the low to above 80.
D. When in the high price area and low price area, such as the change of RSI is inconsistent with the change of exchange rate, it indicates that the general trend is about to reverse.
E. The highest point of RSI has strong resistance; the lowest point of RSI has strong supporting effect.
F. If the price turns back, the first line of defense is 50 of RSI, 40 of the second line of defense, and 30 of the third line of defense; if the price of airdrop market returns, the first line of defense is 50 of RSI, the second line of defense is 60, and the third line of defense is 70. And there are three rules:
(1) If the RSI does not exceed 50, it means that the multi throw power is very strong and it is easy to create a new high; if the RSI of the turn back is not more than 50, it means that the airdrop power is very weak and it is easy to create a new low.
(2) If the second defense line of 40 is broken, the RSI will not set a new high unless it reaches the highest price before rising, which means that the multi throw power is not as good as before; if it breaks the second defense line of 60, unless it reaches the lowest price before falling, RSI will not set a new low again, which means that the airdrop power is not as good as before.