Relative Strength Index (RSI)
Relative Strength Index in Technical Analysis
Relative Strength Index (RSI) is one of the best known indicators used in technical analysis. It measures the relative strength of upside and downside moves in security prices.
Relative Strength Index Formula and Calculation
The formula of Relative Strength Index is:
RSI = 100 – 100 / ( 1 + RS )
where RS is Relative Strength (the ratio of average positive and negative moves).
A detailed explanation of Relative Strength and Relative Strength Index calculation is available here: RSI Calculation.
Relative Strength Index Value Range
The Relative Strenght Index can reach values from 0 to 100. Values close to zero are a sign of declining (bearish) market; values close to 100 occur when prices are rising and the rises are greater than the declines. Here you can see more details about RSI value range.
RSI overbought and oversold
Most traders consider RSI overbought if it is greater than 80. Oversold Relative Strength Index is below 20. You can make these conditions more selective (e.g. 15 and 85 or 10 and 90) or more loose (e.g. 30 and 70).