The Basics of RSI (Relative Strength Index)
RSI (Relative Strength Index) indicator Developed by J. Welles Wilder, This indicator is a momentum oscillator is used to measure the speed and strength of the market move. RSI (Relative Strength Index) indicator line oscillates between zero and 100. According to developer J. Welles Wilder. Rsi considered overbought when the line moves above 70 and oversold when below 30. This indicator used to identify a general trend in the market.
This is a momentum oscillator indicator oscillated between zero and 100.
All cash market and futures, (please note:- this indicator not for options market)
All-time frame and very good work in trending market conditions.
RSI (Relative Strength Index) indicator is a momentum oscillator and this indicator line oscillates between o to 100. This indicator looks at a ratio of the average size of the up-classes over the past “number” periods and compares to the average size of the down-closes. And indicator gives you result in ratio figure between o and 100. This indicator value is smoothed exponentially using the same “number” period parameter. RSI (Relative Strength Index) indicator two type calculation.
1) First calculation for average gain and average loss are simple previous 14 periods averages.
First Average Gain = Sum of Gains over the past 14 periods / 14.
First Average Loss = Sum of Losses over the past 14 periods / 14.
2) The second calculation is based on the prior averages and the current gain loss.
Average Gain = ((previous Average Gain) x 13 + current Gain) / 14.
Average Loss = ((previous Average Loss) x 13 + current Loss) / 14.
This indicator help for identify clear-cut market strength. Default periods setting is 14 and you easily able to change this setting. But 14 periods setting is perfect for the short-term and medium-term trader.
Relative Strength Index (RSI) Parameter depended on trader holding time periods, for example, a short-term trader using (RSI) low periods and opposite site long term trader using (RSI) high periods settings.
Foreign Exchange:- 5 and 9
Fixed Income:- 9
Index:- 9 and 14
Default periods settings are 14 mostly charting tools. This indicator gives you strong overbought and oversold in the market. If (RSI) line indicate above 70 its mean this is an overbought situation and opposite side if (RSI) line indicate below 30 its mean this is an oversold situation. Short term traders sometimes use 2 periods (RSI) setting look for overbought reading above 80 and oversold reading below 20.
Relative strength index (RSI) helpful in identifying overbought and oversold situations in the market. If (RSI) below 30 its do not mean this is a bottom of the market because sometimes (RSI) give you again and again below 30 and 30 levels because of its mean market in a strong downtrend. opposite side some (RSI) indicated above 70 level, again and again, its mean this is a very strong uptrend.
Relative strength index (RSI) oscillated at 0 to 100 levels. If (RSI) indicated above 70 level its mean this is a possibility of an overbought situation. Opposite site (RSI) indicated below 30 level its mean this is a possibility of the oversold situation. Please note it’s not a mean after 70 and 30 level’s market immediately reverse once of these level reached Please wait at list 50 level because this is a very important level market cross this levels after that make any decisions.
This oscillator is very good working in trending market bullish and bearish anywhere. And trading chanakya hope this indicator will be very helpful for your trading future. This indicator gives you most of time very strong signal and all type trader using this indicator like:- intraday trader, short-term trader, long-term trader and many more. (RSI) very good work with trend finder indicator combination because RSI indicated you market trend strength and if you using with trend finder indicator so this combination gives more accurate buying and selling signals. We hope this indicator help you to make lots of money.
(RSI) = 100-100/(1+Rupees)
Average of 14 previous periods up closes (if your parameter setting is 14)
Average of 14 previous periods down closes (if your parameter setting is 14)
RSI values are smoothed manner after the averages of previous up closes price and down closes price divided by n-1.
- Average up close = (previous average up close x (n-1) + current up close) / n.
- Average down close = (previous average down close x (n-1) + current down close) / n.