Saturday, July 21, 2007

Relative Strength Index (RSI)

Relative Strength Index (RSI)

Developed by J. Welles Wilder and introduced in his 1978 book, New Concepts in Technical Trading Systems, the Relative Strength Index (RSI) is an extremely useful and popular momentum oscillator.

The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100. Like most indicators, the RSI only needs one stock to be computed.

n = number of days
Average gain = (total gains/n)/(total losses/n)
For First RS = (Aver.Gain/Aver Loss)

If the RSI rises above 30 it is considered bullish for the underlying stock.
If the RSI falls below 70, it is a bearish signal.

Trading Signals & Divergences
Buy and sell signals can also be generated by looking for positive and negative divergences between the RSI and the underlying stock.

Positive divergence
Buy when price and the Relative Strength Index are both rising.
Sell when the price and the RSI are both falling.

Negative divergence
Buy when price falls and but RSI does not fall instead goes up.
Sell when the price goes up and but RSI does not go up instead falls by good margin

The underlying stock will often reverse its direction soon after such a divergence.

To Calculate Formula in Excel For RSI
Column,Description, = Formula To Enter,Cell No. to Enter

To compute Gain/Loss:
G = % Change, =E3-E2, In G3 & AutoFill (Copy)( Press Shift +D on Kybrd)

To compute Gain only:
H= Advance, =IF(G3>0,G3,0) ,In H3 & AutoFill (Copy)( Press Shift +D on Kybrd)

To compute Average Loss:
K=Average Losses,=AVERAGE(I3:I16),In K16 & AutoFill (Copy)( Press Shift +D on Kybrd)

L=For First RS,= (Aver.Gain/Aver Loss)
L=RS,=ABS(J16/K16),In L16 & AutoFill (Copy)( Press Shift +D on Kybrd)

M=RSI(14 day),=100-(100/1+RS)
M=RSI,=IF(K16=0,100,100-(100/(1+L16))),In M16 & AutoFill (Copy)( Press Shift +D on Kybrd)

Post a Comment

Popular Posts for last 7 days

All Time Popular Posts

Eq mkt Holidays for the 2017 year

Sr. No.

126-Jan-2017ThursdayRepublic Day
404-Apr-2017TuesdayRam Navami
514-Apr-2017FridayDr.Baba Saheb Ambedkar Jayanti/ Good Friday
601-May-2017MondayMaharashtra Day
726-Jun-2017MondayId-Ul-Fitr (Ramzan ID)
815-Aug-2017TuesdayIndependence Day
925-Aug-2017FridayGanesh Chaturthi
1002-Oct-2017MondayMahatama Gandhi Jayanti
1119-Oct-2017ThursdayDiwali-Laxmi Pujan*

*Muhurat Trading will be conducted. Timings of Muhurat Trading shall be notified subsequently.

The holidays falling on Saturday / Sunday are as follows:

Sr. No.DateDayDescription
109-Apr-2017SundayMahavir Jayanti
202-Sep-2017SaturdayBakri ID
504-Nov-2017SaturdayGurunanak Jayanti