While surfing the web the other day, I somehow managed to find myself on a Yahoo! Questions page regarding the topic of the origin of the phrase "What does this have to do with the price of tea in China?” In itself, this may not be of much interest, but I did start to wonder if the origin of this phrase did have to do with the possibility of everything being effected by everything else in this world. To a degree we must all adhere to this idea. That's one reason that I've made it a goal for myself to be better informed regarding financial related issues in this world. In a sense, I do want to start understanding what "this" (whatever the current this may be!) has to do with the price of tea in China! In a attempt to accomplish this mammoth goal, I've decided to begin exploration of some financial and stock market terminology. I groan at the sight of numbers and statistics but for some reason when I see a dollar sign (or any other monetary symbol for that matter!) I have a very different kind of reaction all together.The first term that I ran across was "RSI." After doing some Googling, I found the full term of this acronym to be that of Relative Strength Index (RSI). Of probably no interest to anyone except me (and maybe a few fellow nerds), RSI was developed by the jack-of-all-trades J. Welles Wilder. Seems like this guy had his hand in every cookie jar at a a young age and then in his 30s had a large amount of money from the Real Estate business and nothing to do with it. But I'm straying from my point, aren't I? Even though the guy has had a hand in developing several trading systems as well as momentum oscillator. So what does the RSI show about a stock? The RSI is an analysis tool that uses two extreme values (in this case the highest and lowest selling prices of a stock) to inform when a stock is overbought or oversold. The stock is considered to be overbought when it reaches the upper extreme value and is considered under bought (oversold and undervalued) when it reaches the lower extreme value. For RSI, these values are set at 70 (upper extreme) and 30 (lower extreme). This number is calculated based on recent gains and losses of the stock. If the value is near 70 and is considered oversold then it's likely there will be a pullback. A pullback refers to a formerly upwardly moving stock suddenly "pulls back" and loses value.
When first reading about RSI, I felt it would be easy to buy and sell stocks. If a stock seems to be increasing in price, buy it and keep it for awhile and then sell it before the pullback occurs but it's not that simple. There is more to it than that! See any large rise or drop in a stock will affect the RSI in a way that would make it appear that it would be a good time to buy or sell. So many websites I consulted cautioned that RSI should only be referred to when it is considered in relation to other stock-picking tools.
2 意見:
To what I learned from the stocking buying, isn't it to buy it when it is dropping in price to wait for the certain cycle related with the global growth and some other relevance....I think I don't really understand how to work on gathering information from it. Maybe you could provide me some more specific information so that I could learn from it.
Dear Anny Huang,
Actually I am learning about this kind of thing myself. Yes, there are indicators that you can look for. For my next blog post I will try to read a little bit more about stock charts and how some indicators can tell you whether you should buy or sell.
Up to this point, the only thing that I know for certain is that you don't want to get yourself involved with a stock that is not very hot (that has a low volume). It will be hard to get out of that stock in the future.
So be patient, I will try to discuss in my next post something about stock charts and how you can make educated guesses about what will happen with the stock. Still, from what I have read so far you may make an educated guess but nothing is for certain and you cannot determine what will happen.
Thanks for your comment and questions!
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