Relative strength index

Definition:

Used in technical analysis, it is a measure of the number of days a stock increases in value relative to the number of days it decreases in value. The rule of thumb is that values over 70 suggest overvaluation and hence selling where as values around 30 suggest undervaluation or buying. Of course, this indicator completely ignores all fundamental information about the firm's prospects and, hence, is problematic to use as a stand-alone indicator for an investment strategy.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Good-this-Month order (GTM)

An order to buy or sell securities that continues to be a valid order until the end of the current month.

Subscribe to the Term of the Day via email Get the Term of the Day in your inbox!


Create your free portfolio