Dan Passarelli, CEO - Market Taker Mentoring 

In this video I explain how to trade using RSI [Relative Strength Index]. This index was created by J Welles Wilder as a way to discover whether a stock is overbought or oversold and primed for a reversal. What does the RSI measure? It measures the strength of up candles vs the strength of down candles over a certain period of time.

There are several trading techniques one can use with RSI. First, when the index is above 70, it's thought to be an overbought stock. When it's below 30, it's thought to be oversold.

We can also look at divergences, which is when the highs or lows on the stock chart are different than the highs and lows of the index. If the stock has a higher high, but the RSI has a lower high, that would be a bearish divergence.