If you've been reading Allstarcharts you've seen me referencing RSI on a lot of my charts. I want to talk a little bit about the Relative Strength Index and how I use it. You'll notice that I am not an "oscillator junkie". You won't see 27 momentum indicators on my charts. In fact, you will usually just find one: RSI (or the Relative Strength Index). Do not confuse the RSI with "Relative Strength", which shows the performance of one security relative to another (i.e. Financials vs S&P500).

RSI is a momentum indicator that compares the magnitude of recent gains to recent losses in a range between 0-100. Instead of going into how J. Welles Wilder created the oscillator and how it works, I am going to focus on how I use it personally. Stockcharts.com does an incredible job of explaining it's construction and Connie Brown takes RSI to the next level as good as anyone.

RSI has plenty of benefits to it's users, but...