A research on trading of sensex stocks by using RSI

Abstract

This study has the aim of doing advanced research on technical analysis by finding reliability of buy or sell signals generated by the Relative Strength Index tool. In this study, the RSI tool is tested on Sensex components (30 stocks) for the last six months. The data set for this study had been the daily data, taken from NSE and BSE website. The study compares the return from RSI recommendations and simple buy and hold strategy returns. The study also aims at testing the RSI tool for its probability of generating false buy sell signals. The findings of this study clearly indicate that RSI can be a powerful tool in the markets over buy and hold strategy. The study also makes it clear that the probabilities of false signals are also limited.