The Relative Strength Index (RSI), is a momentum oscillator that measures the speed and change of price movements. Momentum oscillators are designed to help us identify the strength of a particular price movement, be it up or down.
RSI is considered overbought when over 70 and oversold when below 30. In a bull market, the RSI tends to remain in the 40 to 90 range with the 40-50 zone acting as support. During a downtrend or bear market the RSI tends to stay between the 10 to 60 range with the 50-60 zone acting as resistance. These ranges will vary depending on the RSI settings and the strength of the security’s or market’s underlying trend.
RSI Formula
RSI =100 – [100 / ( 1 + (Average of Upward Price Change / Average of Downward Price Change ) ) ]
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