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Relative Strength Index Formula:
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The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements, indicating overbought or oversold conditions of a security. It ranges from 0 to 100 and is commonly used in technical analysis.
The calculator uses the RSI formula:
Where:
Explanation: The RSI compares the magnitude of recent gains to recent losses to determine overbought and oversold conditions of an asset.
Details: RSI is crucial for identifying potential trend reversals, generating buy/sell signals, and assessing market momentum in technical analysis.
Tips: Enter the average gain during up periods and average loss during down periods. Both values must be positive numbers, with AL > 0.
Q1: What is considered overbought and oversold in RSI?
A: Typically, RSI above 70 indicates overbought conditions, while RSI below 30 indicates oversold conditions.
Q2: What time period is commonly used for RSI calculation?
A: The standard RSI calculation uses a 14-period timeframe, though traders may adjust this based on their strategy.
Q3: How is average gain and loss calculated?
A: Average gain is calculated by summing all positive price changes over the period and dividing by the period length. Average loss is similarly calculated for negative price changes.
Q4: Can RSI be used for all types of securities?
A: RSI can be applied to stocks, ETFs, commodities, and other traded securities, though its effectiveness may vary across different markets.
Q5: What are the limitations of RSI?
A: RSI can produce false signals in strongly trending markets and should be used in conjunction with other technical indicators for better reliability.