| Type: Oszillator
Introduction: The relative strength index according to Welles Wilder belongs together with the GD and the Momentum, to the most often used indicators. The common abbreviation is RSI. The RSI after Wilder is not to be mistaken for the relative strength of a bond concerning another paper or an index.
Statement: The RSI tries to measure the internal strength as the development of the paper within a certain number of days. In the RSI a relation is formed between the up- and downward movement of the respective day market prices. The indicator itself always sways between 0 and 100. The advantage of this standardization lies in the fact that single values can be also well compared without chart. By the inclusion of all market prices within the period Wilder reaches a certain smoothing. Extreme market prices do not distort the calculation so strongly.
Formula/calculation:
wenn C > Ct-1 dann u=Ct und d=0
wenn C < Ct-1 dann d=Ct und u=0 U = (Ut-1 + u) / n
D = (Dt-1 + d) / n RS=U / D
U = Average of the upward-closing prices last n days
D = Average of the down-closing prices last n days
RSI=100-(100 / (1+RS))
Interpretation: If the RSI reaches his minimum value of zero, so the title has no internal strength. The market prices have exclusively fallen in the consideration period. A value of 100 means that the market prices have exclusively risen. Values close to zero point to an oversold basis title, values close to 100 on an overbought market. In such points is to be calculated on a counterreaction. However, the real signal is generated only when the indicator exits the extreme range around the minimum or maximum again.
Chart with normal application
The RSI can be also investigated for chart-technical formations, because the RSI forms this more often than the basis title. The interpretation follows by analogy with the formations in the basis title. Developing of divergences between indicator and basis value points to a trend change.
Default setting: 14 days
Overbought: more than 70%
Oversold: less than 30%
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