RSI Calc

The relative strength index (RSI) is a technical indicator used in the analysis of
financial markets. It is intended to chart the current and historical strength or

weakness of a stock or market based on the closing prices of a recent trading
period. The indicator should not be confused with relative strength.
The RSI is classified as a momentum oscillator, measuring the velocity and

magnitude of price movements. Momentum is the rate of the rise or fall in price.
The relative strength RS is given as the ratio of higher closes to lower closes.
Concretely, one computes two averages of absolute values of closing price changes,
i.e. two sums involving the sizes of candles in a candle chart. The RSI computes
momentum as the ratio of higher closes to overall closes: stocks which have had
more or stronger positive changes have a higher RSI than stocks which have had more
or stronger negative changes.
The RSI is most typically used on a 14-day timeframe, measured on a scale from 0 to
100, with high and low levels marked at 70 and 30, respectively. Short or longer
timeframes are used for alternately shorter or longer outlooks. High and low levels
—80 and 20, or 90 and 10—occur less frequently but indicate stronger momentum.
The relative strength index was developed by J. Welles Wilder and published in a
1978 book, New Concepts in Technical Trading Systems, and in Commodities magazine
(now Modern Trader magazine) in the June 1978 issue.[1] It has become one of the
most popular oscillator indices.[2]
The RSI provides signals that tell investors to buy when the security or currency
is oversold and to sell when it is overbought. [3]
RSI with recommended parameters and its day-to-day optimization was tested and
compared with other strategies in Marek and Šedivá (2017). The testing was
randomised in time and companies (e.g., Apple, Exxon Mobil, IBM, Microsoft) and
showed that RSI can still produce good results; however, in longer time it is
usually overcome by the simple buy-and-hold strategy. [4]
Interpretation
Basic configuration
Relative strength index 7-period
Bitcoin, RSI-14, bearish divergence occurs
The RSI is presented on a graph above or below the price chart. The indicator has
an upper line, typically at 70, a lower line at 30, and a dashed mid-line at 50.
Wilder recommended a smoothing period of 14 (see exponential smoothing, i.e. α =
1/14 or N = 14).
Principles
Wilder posited[1] that when price moves up very rapidly, at some point it is
considered overbought. Likewise, when price falls very rapidly, at some point it is
considered oversold. In either case, Wilder deemed a reaction or reversal imminent.
The level of the RSI is a measure of the stock's recent trading strength. The slope
of the RSI is directly proportional to the velocity of a change in the trend. The
distance traveled by the RSI is proportional to the magnitude of the move.
Wilder believed that tops and bottoms are indicated when RSI goes above 70 or drops
below 30. Traditionally, RSI readings greater than the 70 level are considered to
be in overbought territory, and RSI readings lower than the 30 level are considered
to be in oversold territory. In between the 30 and 70 level is considered neutral,
with the 50 level a sign of no trend. [5]
Divergence
Wilder further believed that divergence between RSI and price action is a very
strong indication that a market turning point is imminent. Bearish divergence
occurs when price makes a new high but the RSI makes a lower high, thus failing to
confirm. Bullish divergence occurs when price makes a new low but RSI makes a
higher low.[1]:
68
Overbought and oversold conditions
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Wilder thought that "failure swings" above 50 and below 50 on the RSI are strong
indications of market reversals.[6] For example, assume the RSI hits 76, pulls back
to 72, then rises to 77. If it falls below 72, Wilder would consider this a
"failure swing" above 70.
Finally, Wilder wrote that chart formations and areas of support and resistance
could sometimes be more easily seen on the RSI chart as opposed to the price chart.
The center line for the relative strength index is 50, which is often seen as both
the support and resistance line for the indicator.
If the relative strength index is below 50, it generally means that the stock's
losses are greater than the gains. When the relative strength index is above 50, it
generally means that the gains are greater than the losses.

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The relative strength index (RSI) is a technical indicator used in the analysis of

financial markets. It is intended to chart the current and historical strength or

The RSI is classified as a momentum oscillator, measuring the velocity and

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