Technical Analysis Tools-Relative Strength Index (RSI)

Relative Strength Index (RSI- J. Welles wilder) is an oscillator, used to measure strength of a trend, which oscillates between 0 to 100.

Above 70, RSI says respective instrument is overbought and have chances of fall.
Below 30, RSI says respective instrument is oversold and have chances of rise.    

Formula
               
    Relative strength Index (RSI)  = 100 - 100/(1+RS) = 100*((RS/(1+RS))                    

    Relative strength (RS) = Average Gain for n periods / Average Loss for n periods

Calculating average gain or loss:

Select number of periods

Let's say: number of periods = 14

First value of average gain or loss is, simply, average of 14 period i.e.

First Average Gain = Sum of Gains over the past 14 periods / 14.
First Average Loss = Sum of Losses over the past 14 periods / 14.

After calculating first average gain or loss value, we will use following formula for the calculation

Average Gain = [(previous Average Gain) x 13 + current Gain] / 14.
Average Loss = [(previous Average Loss) x 13 + current Loss] / 14.

Calculating Relative strength (RS):

RS for 14 periods = Average Gain for 14 periods / Average Loss for 14 periods


Calculating Relative Strength Index (RSI):

 Relative strength Index (RSI)  = 100 - 100/(1+RS) = 100*((RS/(1+RS))

Need calculations in excel sheet, drop a message : CLICK HERE