ponaiii26 £49.27 Relative svengthindex-- Wikipedia WIKIPEDIA he Free Encyclopedia Relative strength index The relative strength index (RSI) is a technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The indicator should not be confused with relative strength. The RSI is classified as a momentum oscillator, measuring the velocity and magnitude of price movements. Momentum is the rate of the rise or fall in price. The relative strength RS is given as the ratio of higher closes to lower closes. Concretely, one computes two averages of absolute of closing price changes, i.e, two sums involving the sizes of candles in a candle chart. The RSI computes momentum as the ratio of higher closes to overall closes: stocks which have had more or stronger positive changes have a higher RSI than stocks which have had more or stronger negative changes. The RSI is most typically used on a 14-day timeframe, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Short or longer timeframes are used for alternately shorter or longer outlooks. High and low levels—80 and 20, or 90 and 10—occur less frequently but indicate stronger momentum. The relative strength index was developed by J. Welles Wilder and published in a 1978 book, New Concepts in Technical Trading Systems, and in Commodities magazine (now Modern Trader magazine) in the June 1978 issue! It has become one of the most popular oscillator indices, 2] The RSI provides signals that tell investors to buy when the security or currency is oversold and to sell when it is overbought. [31 RSI with recommended parameters and its day-to-day optimization was tested and compared with other strategies in Marek and Sediva (2017). The testing was randomised in time and companies (e.g., Apple, Exxon Mobil, IBM, Microsoft) and showed that RSI can still produce good result however, in longer time it is usually overcome by the simple buy-and-hold strategy. [4] Calculation For each trading period an upward change U or downward change D is calculated. Up periods are characterized by the close being higher than the previous close: U = closeaow — closeprevious D=0 Conversely, a down period is characterized by the close being lower than the previous period's close, U=0 D = dloseprevious — Cl05@aow If the last close is the same as the previous, both U and D are zero. Note that both U and D are positive numbers. hitpslen wikipedia orgvikiRelatve_strength_index 16zonaisia6 E927 Relative svengthindox- Wikipedia ‘Averages are now calculated from sequences of such U and D, using an n-period smoothed or modified moving average (SMMA or MMA), which is the exponentially smoothed moving average with a = 1 /n. Those are positively weighted averages of those positive terms, and behave additively with respect to the partition. Wilder originally formulated the calculation of the moving average as: newval = (prevval * (n - 1) + newdata) / n, which is equivalent to the aforementioned exponential smoothing. So new data is simply divided by n, or multiplied by a and previous average values are modified by (n - 1) /7n, ie. 1 - a. Some commercial packages, like AIQ, use a standard exponential moving average (EMA) as the average instead of Wilder's SMMA. The smoothed moving averages should be appropriately initialized with a simple moving average using the first n values in the price series. The ratio of these averages is the relative strength or relative strength factor: _ SMMA(U,n) ~ SMMA(D,n) The relative strength factor is then converted to a relative strength index between o and 100:"4) SMMA(U,n) 100 RSI = 100- "> ___ _ 199 — SMMA(U,n) + SMMA(D,n) 14+RS If the average of U values is zero, both RS and RSI are also zero. If the average of U values equals the average of D values, the RS is 1 and RSI is 50. If the average of Uvalues is maximal, so that the average of D values is zero, then the RS value diverges to infinity, while the RSI is 100. Interpretation Basic configuration The RSI is presented on a graph Relative Strength Index (RS!) above or below the price chart. The indicator has an upper line, typically at 70, a lower line at 3o, and a dashed mid-line at 50. Wilder recommended a smoothing period of 14 (see exponential smoothing, i.e. a = 1/14 or N= 14). Principles Wilder posited!!! that when price Soe moves up very rapidly, at some point it is considered overbought. Likewise, when price falls very rapidly, at some point it is considered oversold. In either case, Wilder deemed a reaction or reversal imminent. Relative strength index 7-period The level of the RSI is a measure of the stock's recent trading strength. The slope of the RSI is directly proportional to the velocity of a change in the trend. The distance traveled by the RST is proportional to the magnitude of the move. hitpsslen wikipedia orgvikRelatve_strength_index 216o2aiti26 b4+9:27 Relative strength index: Wikipedia Wilder believed that tops and bottoms are indicated when RSI go above 70 or drops below 30. ‘Traditionally, RSI readings greater than the 70 level are considered to be in overbought territory, and RSI readings lower than the 30 level are considered to be in oversold territory. In between the 30 and 70 level is considered neutral, with the 50 level a sign of no trend. [51 Divergence Wilder further that divergence between RSI and price action is a very strong indication that a market turning point is imminent. Bearish divergence occurs when pri makes a new high but the RSI makes a lower high, thus failing to confirm. Bullish divergence occurs when price makes a new low but RSI makes a higher low. 1:68 Bitcoin, RSI-14, bearish divergence occurs Furthermore, traders often use "hidden" divergences to indicate possible trend reversals. A hidden bullish divergence occurs when the price makes a lower high, while the RSI makes a higher high. Conversely, a hidden bearish divergence occurs when price makes a higher low, but the RSI maki a lower low. Overbought and oversold conditions Wilder thought that "failure swings" above 50 and below 50 on the RSI are strong indications of market reversals] For example, assume the RSI hits 76, pulls back to 72, then rises to 77. If it falls below 72, Wilder would consider this a "failure swing" above 70. Finally, Wilder wrote that chart formations and areas of support and resistance could sometimes be more easily seen on the RSI chart as opposed to the price chart. The center line for the relative strength index is 50, which is often seen as both the support and resistance line for the indicator. If the relative strength index is below 50, it generally means that the stock's losses are greater than the gains. When the relative strength index is above 50, it generally means that the gains are greater than the lo: Uptrends and downtrends In addition to Wilder's original theories of RSI interpretation, Andrew Cardwell has developed several new interpretations of RSI to help determine and confirm trend. First, Cardwell noticed that uptrends generally traded between RSI 40 and 80, while downtrends usually traded between RSI 60 and 20. Cardwell observed when securities change from uptrend to downtrend and vice versa, the RSI will undergo a "range shift.” nitps/en wikipedia orgivikiRelative_strength_index 36zones 927 Relaive strength ndex- Wikipedia Next, Cardwell noted that bearish divergence: 1) only occurs in uptrends, and 2) mostly only leads to a brief correction instead of a reversal in trend. Therefore, bearish divergence is a sign confirming an uptrend. Similarly, bullish divergence is a sign confirming a downtrend ‘The Market Makes |" anew high and RSI |" Does not Reversals Finally, Cardwell discovered the existence of positive and negative reversals in the RSI. Reversals are the opposite of divergence. For example, a positive reversal occurs when an uptrend price correction results in a higher low compared to the last price correction, while RST results in a lower low compared to the prior correction. A negative reversal happens when a downtrend rally results in a lower high compared to the last downtrend rally, but RSI makes a higher high compared to the prior rally. ample of RSI Indicator Diverge! In other words, despite stronger momentum as seen by the higher high or lower low in the RSI, price could not make a higher high or lower low. This is evidence the main trend is about to resume. Cardwell noted that positive reversals only happen in uptrends while negative reversals only occur in downtrends, and therefore their existence confirms the trend. Cutler's RSI A variation called Cutler's RSI is based on a simple moving average of U and D,I7] instead of the exponential average above. Cutler had found that since Wilder used a smoothed moving average to calculate RSI, the value of Wilder's RSI depended upon where in the data file his calculations started. Cutler termed this Data Length Dependency. Cutler's RSI is not data length dependent, and returns consistent results regardless of the length of, or the starting point within a data file. _ SMA(U,n) RS= SMA(D,n) Cutler's RSI generally comes out slightly different from the normal Wilder RSI, but the two are similar, since SMA and SMMA are also similar. General definitions In analysis, = Ifg:T > Risa real function with positive L}-norm on a set 7, then |g| divided by its norm — 19101 ~ Tah = Ifp:T = [0,1] is a distribution, one can evaluate a measurable subsets SC T of the domain. To this end, the associated characteristic function xs: T' —> {0, 1} may be mapped to an fr xsi at. , integral, the normalized function p,(t) : , is an associated distribution "index" (p, xs) € [0, 1] in the real unit interval, via the pairing (p, xs) hitpsien wikipedia orgvikRelatve_strength_index 46ponaiii26 £49.27 Relative svengthindex-- Wikipedia Now for X50 equal to 1 if and only if the value of g is positive, the index (“, x49) is a quotient att) Tol of two integrals and is a value that assigns a weight to the part of g that is positive. A ratio of two averages over the same domain T is also always computed as the ratio of two integrals or sums. Yet more specifically, for a real function on an ordered set T (e.g. a price curve), one may consider that function's gradient g, or some weighted variant thereof. In the case where T = {1,...,n} is an ordered finite set (e.g. a sequence of timestamps), the gradient is given as the finite difference. In the relative strength index, aa evaluates a sequence g derived from closing prices observed in an interval of n so called market periods t € {1,...,m}. The value |g(£)| equals the absolute price change |close(t) — close(t —1)], ie. U+D at t, multiplied by an exponential factor according to the SMMA weighting. The denominator ||g||j is the sum of all those numbers. In the numerator for the index computation, each value of g is multiplied by that of xv0, the characteristic function for periods with positive closes, meaning here one only computes the SMMA of U. The resulting index thus weighs the positive changes U over the whole interval. See also = Stochastic Oscillator = MACD, moving average convergence/divergence = True strength index, a similar momentum-based indicator References 1, J. Welles Wilder, New Concepts in Technical Trading Systems, ISBN 0-89459-027-8 2, John J, Murphy (2009). The Visual Investor: How to Spot Market Trends (https://books.google. com/books?id=pdhp5CbXBJEC&pg=PA 100) (2nd ed.). John Wiley and Sons. p. 100 ISBN 9780470382059. 3. Deng, S.; Sakurai, A. (2013-03-01). "Foreign Exchange Trading Rules Using a Single Technical Indicator from Multiple Timeframes". 2013 27th International Conference on Advanced Information Networking and Applications Workshops. pp. 207-212. doi:10.1109/WAINA.2013.7 (https://doi.org/10.1109%2FWAINA.2013.7). ISBN 978-1-4673-6239-9. S2CID 14825935 (http s://api.semanticscholar.org/Corpus!D:14825935) 4, Marek, Patrice; Sediva, Blanka (2017). "Optimization and Testing of RSI" (https:/www.research gate.net/publication/322209653). 11th International Scientific Conference on Financial Management of Firms and Financial Institutions. 5, "Relative Strength Index" (https:/mww.investorsunderground.com/technical-indicators/rsi-relati ve-strength-index/). Investors Underground. Day Trading Encyclopedia. Retrieved 29 June 2016. 6. "RSI" (http://stockcharts.com/school/doku php?id=chart_school:technical_indicators:relative_st rength_index_rsi). StockCharts. StockCharts.com. Retrieved 29 June 2016. 7. Cutler's RSI page (http://www.aspenres.com/Documents/AspenGraphics4.0/CutlersRSI.htm) at Aspen Graphics Technical Analysis Software External links Retrieved from “hitps://en.wikipedia.orgiw/index.php?title=Relative_strength_indexBoldid=1186767557" hitpsien wikipedia orgvikRelatve_strength_index 56ponaiii26 £49.27 Relative svengthindex-- Wikipedia hitpslen wikipedia orgvikiRelatve_strength_index 86