Relative Strength Indicator (RSI)

Overview

The RSI is an oscillator

Calculation

Calculate the average gain as a percentage

RSI = 100 – [100 / ( 1 + (Average of Upward Price Change / Average of Downward Price Change ) ) ]

Where the average price change (both up and down) is calculated using an exponentially weighted moving average. The alpha used in the calculation is equal to 1/size, where size is specified as a parameter to the algorithm. (size is taken to be a rough equivalent of the number of days in the moving average.)