Relative Strength Index (RSI)
The Relative Strength Index (RSI) is a technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The RSI is classified as an oscillator, since the resulting curve fluctuates between values of 0 and 100. The RSI is most typically used on a 14-day timeframe, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Shorter or longer timeframes are used for alternately shorter or longer outlooks.
History of RSI
The Relative Strength Index was developed by J. Welles Wilder Jr. and introduced in his 1978 book, New Concepts in Technical Trading Systems. Wilder believed that the RSI could be used to determine whether a stock was overbought or oversold. The RSI is calculated using the average gains and losses of a stock over a certain period of time. The RSI is considered overbought when it is above 70 and oversold when it is below 30. Wilder also created other technical indicators, such as the Average Directional Index (ADX), Parabolic SAR, and the Average True Range (ATR).
Comparison Table
| Indicator | Timeframe | High Level | Low Level |
|---|---|---|---|
| RSI | 14-day | 70 | 30 |
| ADX | 14-day | 50 | – |
| Parabolic SAR | – | – | – |
| ATR | 14-day | – | – |
Summary
The Relative Strength Index (RSI) is a technical indicator used to measure the current and historical strength or weakness of a stock or market. It is classified as an oscillator, since the resulting curve fluctuates between values of 0 and 100. The RSI was developed by J. Welles Wilder Jr. and introduced in his 1978 book, New Concepts in Technical Trading Systems. It is most typically used on a 14-day timeframe, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. For more information about the RSI, visit Investopedia, The Balance, and Investing.com.
See Also
- Average Directional Index (ADX)
- Parabolic SAR
- Average True Range (ATR)
- Moving Average Convergence Divergence (MACD)
- Bollinger Bands
- Stochastic Oscillator
- On Balance Volume (OBV)
- Accumulation/Distribution Line
- Money Flow Index (MFI)
- Commodity Channel Index (CCI)
