Relative strength index

RSI(RelativeStrengthIndex) is a technical analysis index, which is used to measure the intensity and speed of price trend and judge the overbought and oversold situation in the market. RSI was put forward by American engineer J.WellesWilder in 1978, which is widely used in financial markets such as stock, futures and foreign exchange.

Calculation formula of RSI

The calculation of RSI is based on the price changes in a certain period, and generally takes 14 days as the calculation period. The steps for calculating RSI are as follows:

1. Calculate the daily price fluctuation. If the closing price of the day is higher than the closing price of the previous day, the increase is the closing price of the day MINUS the closing price of the previous day; If the closing price of the day is lower than the closing price of the previous day, the decline is the closing price of the previous day minus the closing price of the current day; If the closing price of the day is equal to the closing price of the previous day, the increase or decrease is 0.

2. Calculate the index average of daily price rise and fall. First, calculate the average increase of 14 days, and then calculate the average decrease of 14 days, which are called averagegain and averageloss respectively. The calculation formula of averagegain is (averagegain* 13+ current increase)/14, and the calculation formula of averageloss is (averageloss* 13+ current decrease)/14.

3. Calculate the relative length. The calculation formula of relative strength is RS=averagegain/averageloss.

4. calculate RSI. The formula of RSI is RSI =100-(100/(1+RS)).

How to use RSI for trading

RSI can be used to judge the overbought and oversold situation of the market, thus guiding the trading decision. Generally speaking, when RSI exceeds 70, it is considered that the market is overbought and there may be price correction or adjustment; When RSI is lower than 30, it is considered that the market is oversold, and the price may rebound or reverse.

Trading strategies based on RSI generally include the following steps:

1. Observe the value of RSI. When RSI exceeds 70, it means that the market may be overbought, and you can consider selling or lightening your position; When the RSI is lower than 30, it means that the market may be oversold, and you can consider buying or adding positions.

2. Confirm with other indicators. Although RSI is a commonly used technical index, it may not be accurate when used alone. In order to increase the reliability of trading signals, it can be confirmed by other technical indicators such as moving average and MACD.

3. Set stop loss and take profit. Whether buying or selling, we should set up reasonable stop-loss and profit-taking positions to control risks and ensure profits.