Relative Strength Index (RSI) Indicator

Relative Strength Index (RSI) Indicator

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements of a security . Developed by J. Welles Wilder he introduced RSI in his 1978 book, New Concepts in Technical Trading Systems. RSI oscillates between 0 and 100. when the indicator is above 70 for a particular stock it is considered overbought whereas when the indicator is below 30 it is in oversold zone .This helps in knowing the general trend of a stock .The default setting used for the RSI is 14 days period for daily charts . Also Known as ‘look-back period’. In case you are analyzing hourly chart default period is 14 hours .

Formula used to calculate RSI :

RSI = 100 – [100 / ( 1 + (Average Gain / Average Loss ) ) ]

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