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Finance: What is the Relative Strength Index? 2 Views


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Description:

What are lenders? Lenders are parties which can be individuals, groups or institutions that are engaged in making liquid funds that they either own or can access available to other parties in return for repayment plus interest over agreed upon time periods.

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Transcript

00:00

finance a la shmoop what is the relative strength index as is the satisfaction

00:09

gained from a Saturday night date well everything is relative [man and woman kissing in car]

00:13

yeah all right when the same is true in stock market and generally speaking when

00:16

viewing any given stock its performance is mapped against the overall market and

00:22

for most Wall Streeters the overall market is defined as probably the S&P

00:26

500 more or less maybe the Dow may be Nasdaq but that's P 500 kind of what [man discussing S&P 500]

00:31

everyone uses so if the market or the S&P 500 was up 20% in a given period and

00:36

your stock was up only 10% well then sadly for you even though 10% in a short

00:41

period of time is a nice gain it was relatively meh [man gives thumbs up]

00:46

yeah its relative strength was meh not so great that's what man means by the

00:50

same token if the market was down 20% in that same period and your stock was down

00:54

only a 5% well then what squared for you your stock was relatively strong so [stock stamped relatively strong]

01:01

what's a good RSI or relative strength index and what's a bad one well every

01:05

stock is placed on a scale of 1 zero to a hundred and this scale measures a [RSI scale appears]

01:09

stock's recent trading strength if it goes over the 70ish mark well that means

01:14

it's moving up rapidly and it's probably overbought so it might make you nervous

01:19

if you pay attention to charts and crystal balls when you pick your stocks [girl biting her nails]

01:23

well if the thing drops below 30 ish in the same way well then it's likely

01:27

oversold maybe you should buy some yeah go go buy some Sears or a big-box [man talking outside Sears]

01:32

retailer yeah how about that yeah so there's a reason these things

01:35

exist only in a vacuum and and don't help real stock pickers necessarily dot

01:40

out their portfolio well in either case overbought or oversold the most likely

01:44

scenario is that there's gonna be a return to the mean or a regression to

01:48

the mean in the immediate future least if you believe the RSI Index thing you

01:52

hear working and yeah you want to know that a stock you own is reliably [stock working out in a gym]

01:55

steadily strong and maybe not all over the place in extreme hills and valleys

01:59

are great on a ski vacation investing in the stock market well not so much but if [man skis off a slope]

02:04

you're gonna do that well get used to the hills they don't go

02:06

way

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