Before we dive into the strategies, let’s first ground ourselves on the RSI indicator and provide you with a few techniques not widely known.
Relative Strength Index Definition
The Relative Strength Index (RSI) is one of the most popular indicators in the market.
The RSI is a basic measure of how well a stock is performing against itself by comparing the strength of the up days versus the down days. This number is computed and has a range between 0 and 100. A reading above 70 is considered bullish, while a reading below 30 is an indication of bearishness.
Relative Strength Index Formula
The RSI was developed by J.Welles Wilder and detailed in his book New Concepts in Technical Trading Systems in June of 1978. For all you hardcore technicians, below is the relative strength index formula example.
The default setting for the RSI is 14 days, so you would calculate the relative strength index formula as follows: