The Relative Strength Index (RSI) measures the speed (velocity) and change (magnitude) in directional price movements based on momentum. American mechanical engineer J. Welles Wilder developed RSI in 1978. An RSI graph visually represents a particular market’s current and historical strength and weakness. The strength or weakness is based on closing prices over a specified trading period creating a reliable metric of price and momentum changes. Since cash-settled instruments (stock indexes) and leveraged financial products (the entire field of derivatives) are pretty popular, the RSI is an excellent indicator of price movements.
The RSI is displayed as a line graph on a scale of zero to 100. An RSI reading of 70 or higher indicates an overbought condition. A reading of 30 or below indicates an oversold situation.
Traders often use crossings of the RSI line between overbought and oversold lines as signals to buy or sell.
Practice: how we use RSI as a signal in Sema
RSI = 100 – 100 / (1 + RS)
RS = Average Gain of n days UP / Average Loss of n days DOWN
- We take an interval of 14 candles.
- Then, we calculate the sum of the lengths of green candles (Up) and divide it by the sum of the red candles (Down)
- Bring everything to the interval from 0 to 100 through division.
Standard parameters are: RSI(14)
The most commonly used values are 14 days.
How to display RSI in Sema?
To see RSI on a chart, press on the hexagon icon in the right corner of a coin chart. Choose RSI to display the RSI indicator on your chart. You can switch between candles and line format right above.