Relative Strength Index
Definition
A momentum oscillator that measures the speed and magnitude of recent price changes on a scale of 0 to 100.
Explanation
RSI was developed by J. Welles Wilder Jr. in 1978. The standard setting uses 14 periods. RSI above 70 is traditionally considered overbought; below 30 is oversold. However, in strong uptrends, RSI can remain overbought for extended periods — premature selling based solely on RSI would have missed much of the 2020-2021 bull run. More reliable RSI signals include bullish/bearish divergences (price makes new highs but RSI doesn't) and failure swings (RSI breaks above/below previous swing points).
Formula
RSI = 100 - [100 / (1 + RS)], where RS = Average Gain / Average Loss
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