Relative Strength Index (RSI)
The relative strength index (RSI) was developed by J Welles Wilder, Jr. As a momentum indicator, the RSI measures the velocity of price movements. In this model, prices are generally considered to be elastic in that they can move only so far from a mean price before reacting or retracing. Rapid price advances result in overbought situations, and rapid price declines result in oversold situations. The slope and values of the RSI are directly proportional to the velocity and magnitude of the price move and are extremely helpful in identifying overbought and oversold situations.
The core of the formula for RSI takes the last “n” periods and divides the gross positive changes per period by the gross negative changes. ...
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