Dear Traders, There is Magic in RSI - Sudhir Dixit - Bog

To me, RSI is a fascinating and dynamic indicator. Others may consider it a momentum oscillator only, which works more effectively in a range-bound market, but trust me, it can give you significant signals even in trending markets. If you don't believe me, at least believe Andrew Cardwell, who has said, 'I haven't found anything in over thirty years of work that can hold a candle to what RSI can do.'
Most of the other indicators like moving averages are lagging indicators, as they lack predictive power.
On the other hand, RSI is a leading indicator which can give significant clues about future prices, if we have the ability to decode them.
I call RSI magical, because it can predict prices, because it can tell us where to get in and where to get out.
In a nutshell, these are some of the most important things RSI can tell us:
•RSI can tell us whether the price is likely to go up or down (momentum).
•RSI can warn us through divergences, when a trend is beginning to change (slowdown of momentum).
•RSI can give us trend continuation signals through positive and negative reversals (Andrew Cardwell's brainchildren).
•RSI can even help us set price objectives for negative and positive reversals (again Andrew Cardwell's discovery)
•RSI can pretty accurately tell in advance whether a breakout is going to happen in a channel or a pattern (because it is a leading indicator)