The video introduces the Relative Strength Index (RSI) as an important indicator in trading.

• RSI stands for Relative Strength Index, an indicator used to represent the strength of price movements.

The presenter explains how to set up the RSI indicator on a trading chart.

• RSI setup involves entering 'RSI' in the indicators section and selecting the first option for Relative Strength Index.
• The RSI can be hidden or shown by double-clicking on the chart.
• Configuration of RSI includes setting period to 7, choosing color preferences, setting the upper band to 80, the lower band to 20, and making the background transparent.

The video provides an interpretation of the RSI movements and how they correlate with price movements in the chart.

• The RSI's movements correspond to the price movements on the chart.
• An RSI reading above the upper band indicates overbought conditions; below the lower band signals oversold conditions.

The video explains the concept of overbought and oversold conditions using the RSI.

• Overbought conditions suggest a potential for a price decline as the market might be overheated.
• Oversold conditions indicate a potential for a price increase as the market might be undervalued.

The concept of divergence is explored, highlighting its importance in predicting future price movements.

• Divergence occurs when there is a discrepancy between the chart's price movements and the RSI's readings.
• Divergence can be a strong indicator of potential price movement in the direction the RSI suggests, especially when confirmed by overbought or oversold conditions.

Several examples of divergence are presented to illustrate how it can be identified and interpreted.

• Divergence is identified by comparing peaks and troughs in the price chart with those in the RSI.
• The presenter demonstrates how to spot divergence and explains its implications for future price action.