Relative Strength Index [RSI]

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The Relative Strength Index function determines the internal strength of a field using the number of upward and downward price changes over a given period of time. Parameters ------------------ Data          The data to use in the calculation. This is typically a field in a data series or a calculated value. Period        The number of bars of data to include in the calculation, including the current value.                   For example, a period of 3 uses the changes for the current bar and the two previous bars. Function Value ------------------------ The Relative Strength Index is based on a ratio of the average upward changes to the average downward changes over a given period of time. It has a range of 0 to 100 with values typically remaining between 30 and 70. Higher values indicate overbought conditions while lower values indicate oversold conditions. The Relative Strength Index at the beginning of a data series is not defined until there are enough values to fill the given period.. In addition, the value is defined as 100 when no downward changes occur during the given period. Usage ----------- The Relative Strength Index (RSI) is typically used with a 9, 14, or 25 calendar day (7, 10, or 20 trading day) period against the closing price of a security or commodity. The more days that are included in the calculation, the less volatile the value. The Relative Momentum Index (RMI) is an extension of the RSI which provides an additional smoothing parameter. The RSI usually leads the price by forming peaks and valleys before the price data, especially around the values of 30 and 70. In addition, when the RSI diverges from the price, the price will eventually correct to the direction of the index. See the sample entry/exit systems for an example using the Relative Strength Index. Source ------------ This indicator is based on an entry in "Technical Analysis From A To Z" by Steven B. Achelis. It was developed by J. Welles Wilder and is discussed in his book "New Concepts in Technical Trading".