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Relative strength index formula :-

Relative strength index formula : RSI is developed by J.Welles Wilder called a Relative Strength Index. It is also called a momentum oscillator that measures the speed, change in price movement. The traders choose a lower time frame while other options for setting the RSI period. It increases the sensitivity of the oscillator. They are used to identify the oversold and overbought conditions in instruments of trading. The objective of RSI is to measure the change in price. They are used by technical analysts over the globe.RSI can be used to spot a general trend and look for failure swings. It acts as a tool to indicate extreme in price action to use place contrarian trades. The RSI forms a chart pattern that doesn’t show the underlying price chart as double tops and bottom.RSI tends to remain in the 40 to 90 range with the same zones acting as support. The downtrend RSI tends to stay between the ten to sixty ranges with the 50 to 60 zone that acts as resistance.

The range will depend on RSI settings and the strength of the security. If underlying prices will make new high or low is confirmed by the RSI. The RSI indicator has got up over competing oscillator as it has fixed points at 0 and 100. It is smoother than the big brother as it uses average. If the indicator is below 30 the price action is considered as weak and oversold. If it is above 70 then the asset is a strong uptrend bought up. It is easy to approach and understand that it has a fixed oversold level. If the RSI reaches an extreme and returns to the centerline it shows an indication of a turning point in the trend. RSI is common for technical traders to watch the centerline show shifts in trend. RSI will measure the ratio of up-move to down-move and normalizes the calculation. The formula for the RSI indicator takes two equations in solving the formula. The first component equation obtains the initial relative strength value as the ratio of the average up close to the average of down closes over N periods.

RS = average of 'N' day close up / Average of 'N' day close down
RSI value is calculated by the index indicator to 100 through use,
RSI=100-(100/1+RS)

The building of RSI indicator

We should take a base number of periods on which to base the study. Then compare today’s closing price with yesterdays and add all the upward movements in points between closing prices. Neatly add downward movements between closing prices and calculate the exponential moving average of the upward, downward price movements. Finally, calculate the relative strength, RS = EMA Upward Price Movements / EMA Downward Price Movements. Lastly Calculate the Relative Strength Index (RSI): RSI = 1 / (1 + RS)