A trade is profitable only if both the purchase and the sale are done at the right time. Many times, traders sell their positions too early and leave profits on the table or they keep holding on to the trade even after the trend changes. This leads to profits evaporating, and many times the trade turns into a loss.
While it is important to trade with the trend, it is also important to keep an eye out for signs of a reversal. If traders learn to spot these warning signs, they can avoid buying at the tops and selling at the bottoms, which is a common experience for many new traders.
One tool that can help traders spot trend reversals is the relative strength index (RSI) indicator.
The RSI is a momentum oscillator that measures the magnitude of recent price changes and as it moves between 0 and 100. Generally, it is used to spot the overbought and oversold levels on