Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a technical momentum indicator that compares the size of recent gains to recent losses in an attempt to determine overbought and oversold stock price.

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a technical momentum indicator that compares the size of recent gains to recent losses in an attempt to determine overbought and oversold stock price.

 


Relative Strength Index (RSI) Calculation

The Relative Strength Index is calculated by dividing the average upward price changes by the average absolute price change. The price changes are determined by comparing the current close to the previous close.  The RSI takes one input parameter which is the number of days used to average the up and down price changes.

Relative Strength Index (RSI) Interpretation

The Relative Strength Index is typically viewed as a means of either confirming or denying price movements.  The RSI can be used to time long entry by waiting for the RSI to rise above a certain threshold, 20% for example. 



The RSI can be used to time short entries or close long positions by waiting for the RSI to fall below a certain threshold, 80% for example. 

Price chart with Relative Strength Index plotted beneath illustrating buy and sell zones

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