Relative Strength Index (RSI)
Relative Strength Index (RSI) - Shows how strongly a stock is moving in its current direction.
The RSI shows how strongly a stock is moving in its current direction.
The RSI was created by J. Welles Wilder.
The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100.
Wilder recommended using 70 as the overbought level, and 30 as the oversold level. If the RSI rises above 30 it is considered bullish. If the RSI falls below 70, it is considered bearish.
The formula for calculating the RSI is:
RSI = 100 - 100 / 1 + RS
Where RS = Average Gain / Average Loss
Average Gain = [(Total gains during last 14 periods / 14) x 13 + current Gain] / 14
Average Loss = [(Total losses during last 14 periods / 14) x 13 + current Loss] / 14