RELATIVE STRENGTH INDEX (RSI)

  
Relative Strength Index (RSI) is price following oscillator & it oscillates between 0 & 100. It’s developed by Welles Wilder in 1978. It’s very popular momentum indicator

Description :

Relative Strength Index (RSI) gives momentum of stock price movements. It’s work good with 14-days time period. You can very time period & find out which time period works better for you.

RSI usually tops above 70 and bottoms below 30. Usually RSI make tops or bottoms before the stock price tops or bottoms. Using RSI you can find out Support & resistance.

The RSI oscillator fluctuates between 0  and 100.  .You can buy stock when you see‘s positive divergence & sell with negative divergence

It’s difficult to explain without example. For more detail please refer to Mr. Wilder’s book

How to Calculate?

 Here we calculate 14 days RSI

                                   RSI =  100 -  [  100 /  (1+ RS)].

                                                  Where   RS = ( Avg  Gain ) /  ( Avg Loss)





Divergence in the Relative Strength Index (RSI):

A lower peak in the Relative Strength Index (RSI) against higher highs in the stock market called negative divergence and typically it's a Sell signal.
A higher peak in the Relative Strength Index (RSI) against lower lows in the stock market called positive divergence and typically it's a Buy signal.

To get good result with Relative Strength Index (RSI) we need to use it with other technical indicators like Moving Average (MA) | On Balance Volume (OBV) | Percentage Price Oscillators (PPO) | Price Rate Of Change (ROC) | Stochastic Oscillator (STO) | Commodity Channel Index (CCI) | Chaikin Money Flow oscillator (CMF). When we use two or three technical indicators and in case of positive divergence and negative divergence it giving real good result, only you need to change time span and find out which is a better pair for you.