RSI

What is the definition of RSI?

Developed J. Welles Wilder, RSI is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. Specifically: RSI = 100 - 100/(1 + RS) where RS = Average of x days' up closes / Average of x days' down closes. An asset is deemed to be oversold once the RSI falls below the 30 level, meaning that it may be getting undervalued and is a good candidate for a uptick. RSI uses all the price changes that occur over a given period in order to derive the average price change.


Stockopedia explains RSI...

This RSI calculation is based on 14 days, which is the default suggested by Wilder in his book, plus a 20 range (the distance between the middle line and the upper and lower threshold lines). Richard Tortoriello backtests a a much longer timeframe 28-week RSI in the excellent book 'Quantitative Strategies for Achieving Alpha'.



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