1. What is the Relative Strength Index?

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. It oscillates between 0 and 100 and is typically used to identify overbought or oversold conditions in trading.

2. How Does the Calculator Work?

The calculator uses the RSI formula:

Where:

• \( RS \) — Relative Strength (Average Gain / Average Loss)
• Average Gain — Average of all up moves in the period
• Average Loss — Average of all down moves in the period

Explanation: The RSI compares the magnitude of recent gains to recent losses to determine overbought (typically >70) and oversold (typically <30) conditions.

3. Importance of RSI Calculation

Details: RSI is a key technical analysis tool used by traders to identify potential trend reversals, confirm price movements, and spot divergence between price and momentum.

4. Using the Calculator

Tips: Enter the average gains and average losses as percentages. Both values must be non-negative, and at least one must be positive.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical RSI period length?
A: The standard RSI period is 14 days, but traders may use different periods (e.g., 9 or 25) depending on their trading style.

Q2: What do different RSI values indicate?
A: Generally, RSI >70 indicates overbought conditions, while RSI <30 indicates oversold conditions. Values between 30-70 are considered neutral.

Q3: How is RSI different from other momentum indicators?
A: RSI is normalized (0-100 range) and focuses specifically on the ratio of average gains to losses, making it particularly useful for identifying extremes.

Q4: Can RSI be used for all types of securities?
A: RSI works best for securities with sufficient volatility. It may be less effective for very stable instruments or those with extremely low volume.

Q5: What are common RSI trading strategies?
A: Common strategies include trading overbought/oversold signals, divergence between RSI and price, and centerline (50 level) crossovers.