The Relative Strength Index (RSI)
The relative strength index is a popular oscillator devised by Welles Wilder. The RSI measures the relative changes between the higher and lower closing prices.
The formula for calculating the RSI is:
?5/=100-[100/(1+RS)], where
RS - (average of X days up closes/average of X days down closes);X - predetermined number of days The original number of days, as used by its author, was 14 days. Currently, a 9-day period is more popular.
The RSI is plotted on a 0 to 100 scale. The 70 and 30 values are used as warning signals, whereas values above 85 indicate an overbought condition (selling signal) and values under 15 indicate an oversold condition (buying signal.) Wilder identified the RSI’s forte as its divergence versus the underlying price.
The relative strength index is a popular oscillator devised by Welles Wilder. The RSI measures the relative changes between the higher and lower closing prices.
The formula for calculating the RSI is:
?5/=100-[100/(1+RS)], where
RS - (average of X days up closes/average of X days down closes);X - predetermined number of days The original number of days, as used by its author, was 14 days. Currently, a 9-day period is more popular.
The RSI is plotted on a 0 to 100 scale. The 70 and 30 values are used as warning signals, whereas values above 85 indicate an overbought condition (selling signal) and values under 15 indicate an oversold condition (buying signal.) Wilder identified the RSI’s forte as its divergence versus the underlying price.
