The relative strength index ( RSI ) is a technical indicator used in financial market analysis. It is intended to map the current and historical strengths and weaknesses of a stock or market based on the closing price of a recent trading period. Indicators should not be confused with relative strength.
RSI is classified as a momentum oscillator, measuring the velocity and magnitude of the direction price movement. Momentum is the rate of increase or decrease in price. RSI calculates momentum as a higher closing ratio to a lower closure: stocks that have more or stronger positive changes have a higher RSI than stocks that have more or more negative changes.
RSI is most commonly used over a 14 day period, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Shorter or longer periods are used for shorter or longer views in turn. Extreme higher and lower levels - 80 and 20, or 90 and 10 - are less common but indicate stronger momentum.
The relative strength index was developed by J. Welles Wilder and published in a 1978 book, New Concept in Technical Trading System , and in Commodity magazine (now Futures magazine) in the June 1978 edition. It has become one of the most popular oscillator indices.
RSI provides a signal that tells investors to buy when the currency is oversold and sells when overbought.
RSI with recommended parameters and day-to-day optimizations have been tested and compared to other strategies in Marek and? EdivÃÆ'¡ (2017). Testing is done randomly at times and companies (eg, Apple, Exxon Mobile, IBM, Microsoft) and shows that RSI can still produce good results; however, over time it is usually overcome with a simple buy-and-hold strategy.
Video Relative strength index
Calculation
Untuk setiap periode perdagangan, perubahan ke atas U atau perubahan ke bawah D dihitung. Periode naik dicirikan dengan penutupan lebih tinggi dari penutupan sebelumnya:
Sebaliknya, periode bawah ditandai dengan penutupan yang lebih rendah dari penutupan periode sebelumnya (perhatikan bahwa D adalah angka positif),
If the last closure is the same as before, both U and D are zero. Average U and D are calculated using n -mixed or modified average period (SMMA or MMA) which is a smooth exponential Moving Average with ? Ã, = Ã, 1/period. Some commercial packages, such as AIQ, use the average exponential moving average (EMA) as the average of Wilder's SMMA.
Wilder originally formulated the moving average calculation as: newval = (prevval * (period - 1) newdata)/period. This is entirely equivalent to the exponential smoothing. The new data is only divided by the same period with the alpha value of 1/period. The previous average value modified by (period -1)/period applicable is period/period - 1/period and finally 1 - 1/1 - alpha period.
Rasio rata-rata ini adalah kekuatan relatif atau faktor kekuatan relatif :
If the average D is zero, then according to the equation, the RS value will approach infinity, so the resulting RSI, as calculated below, will approach 100.
Faktor kekuatan relatif kemudian dikonversi ke indeks kekuatan relatif antara 0 dan 100:
The smoothed mean movements should be precisely initialized with simple moving averages using the first n values ​​in the price series.
Maps Relative strength index
Interpretation
Basic configuration
RSI is presented on the chart above or below the price graph. The indicator has a top line, usually at 70, a bottom line at 30, and a dotted midline at 50. Wilder recommends a smoothing period of 14 (see exponential smoothing, ie ? Ã, = 1/14 or < i> N Ã, = Ã, 14).
Principles
Wilder points out that when prices move up very quickly, at some point it is considered overbought. Likewise, when the price falls very quickly, at some point it is considered oversold. In both cases, Wilder assumes a reaction or reversal is imminent.
The RSI level is a measure of the strength of recent stock trading. The slope of the RSI is directly proportional to the rate of change in the trend. The distance traveled by the RSI is proportional to the magnitude of the movement.
Wilder believes that superiors and butters are indicated when the RSI goes above 70 or falls below 30. Traditionally, RSI readings greater than level 70 are considered in the overbought region, and RSI readings lower than level 30 are considered in the oversold region. Between 30 and 70 levels are considered neutral, with level 50 marks no trend.
Divergence
Wilder further believes that the difference between RSI and price action is a very strong indication that the turning point of the market is imminent. Bearish divergence occurs when the price creates a new high price but the RSI makes the price lower, thus failing to confirm. A bullish divergence occurs when the price makes a new low but the RSI makes the lower lower.
Overbought and oversold conditions
Wilder thinks that "swing failure" above 70 and below 30 on the RSI is a strong indication of market reversal. For example, assume RSI reaches 76, pulls back to 72, then rises to 77. If it drops below 72, Wilder will regard this as a "swinging failure" above 70.
Finally, Wilder writes that chart formation and support and resistance areas can sometimes be more easily seen on the RSI chart than the price chart. The center line for the relative strength index is 50, which is often seen as the support and resistance line for the indicator.
If the relative strength index is below 50, it generally means that the stock loss is greater than the profit. When the relative strength index is above 50, it usually means that the profit is greater than the loss.
Uptrend and downtrend
In addition to Wilder's original theory of RSI interpretation, Andrew Cardwell has developed several new interpretations of the RSI to help determine and confirm trends. First, Cardwell notes that the uptrend is generally traded between RSI 40 and 80, while downtrends are usually traded between RSI 60 and 20. Cardwell observes when securities changes from trend up to downtrend and vice versa, RSI will undergo a "shifting range."
Furthermore, Cardwell notes that the bearish differences: 1) only occur in uptrends, and 2) most only lead to shorter correction than trend reversals. Therefore, bearish divergence is a sign that confirms the uptrend. Similarly, a bullish divergence is a sign that confirms a descending trend.
Inversion
Finally, Cardwell found a positive and negative reversal at RSI. Reversal is the opposite of divergence. For example, a positive reversal occurs when the uptrend price correction results in a lower low than the last price correction, while the RSI produces a lower low than the previous correction. A negative reversal occurs when the downtrend rally results at a lower height than the last downtrend rally, but the RSI makes it higher higher than the previous rally.
In other words, in spite of the stronger momentum as seen by the lower high or low low at the RSI, the price can not create a lower high or lower low. This is proof that major trends will begin soon. Cardwell noted that positive reversals occur only in uptrend while negative reversals occur only in downtrends, and therefore their presence confirms the trend.
RSI Cutler
Variations called Cutler's RSI are based on simple moving averages U and D , instead of the above exponential averages. Cutler has found that since Wilder uses a smoothed moving average to calculate the RSI, Wilder's RSI value depends on where in the calculation data file begins. Cutler termed this Data Long Dependency. RSI Cutler does not rely on data length, and returns consistent results regardless of length, or starting point in data files.
RSI Cutler generally comes out slightly differently from the usual Wilder RSI, but both are similar, because SMA and SMMA are similar.
See also
- MACD moving average convergence/divergence
- True strength index, similar momentum-based indicator
References
External links
Source of the article : Wikipedia
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