Complete list
Relative Strength Index (RSI)
Relative strength index is a momentum oscillator to indicate overbought and oversold conditions in the market. It oscillates between 0 and 100 and its values below a certain value, usually, 30 indicate an oversold market while values above another, say 70, indicate overbought conditions. Typically, a look back period of 14 days is considered for its calculation and can be changed to fit the characteristics of a particular asset or trading style.
Calculation of RSI involves the following steps:
Average Gain = (previous average gain x 13 + current gain)/14
Average Loss = (previous average loss x 13 + current loss)/14
Relative Strength (RS) = Average Gain / Average Loss
RSI = 100 – 100 / (1+RS)
In the chart above, red lines indicate both 14 days RSI plot and the levels for RSI,
while blue line indicates the close price of the cryptocurrency BTC/USD. As discussed above, at around 30 RSI plot is indicating oversold conditions and at around 70, the plot is indicating overbought conditions.
These overbought and oversold indications shouldn’t be interpreted as a direct buy/sell signals. Though, they can be a part of the signal generating decision process.
Calculation of RSI involves the following steps:
Average Gain = (previous average gain x 13 + current gain)/14
- First average gain = sum of gains in last 14 days/14
Average Loss = (previous average loss x 13 + current loss)/14
- First average loss = sum of losses in last 14 days/14
Relative Strength (RS) = Average Gain / Average Loss
RSI = 100 – 100 / (1+RS)
In the chart above, red lines indicate both 14 days RSI plot and the levels for RSI,
while blue line indicates the close price of the cryptocurrency BTC/USD. As discussed above, at around 30 RSI plot is indicating oversold conditions and at around 70, the plot is indicating overbought conditions.
These overbought and oversold indications shouldn’t be interpreted as a direct buy/sell signals. Though, they can be a part of the signal generating decision process.
Check out our free courses
RELATED KEYWORDS