Description

• Relative Strength Index, introduced by Welles Wilder is an oscillator
• It goes up when the market is strong, and down, when the market is weak
• The oscillation range is between 0 and 100, indicating overbought / oversold conditions
• It helps a trader to understand buying & selling pressures to take low risk positions

Interpretation

• Readings below 30 indicate oversold
• Readings over 70 indicate overbought
• RSI is a very popular tool because it can also be used to confirm trend formations. In order to use, it give early entry into a trend; Average of RSI (RSI Avg) is plotted along with RSI to act as trigger line

Default Parameters Used/Inputs

• Price Line
• RSI Bars
• Avg Type
• Avg Bars

Returns/Output

Relative Strength Index value of the stock

Formula

RSI = 100 - (100 / (1 + RS))
Where
RS = (Avg_of_n_day_up_closes) / (Avg_of_n_day_down_closes)
or
RS Average Upward Price Move / Average Downward Price Move