Wilder RSI (Relative Strength Index)

- Formula RSI. Difference between average closing price on up days vs average closing price on down
days in 14 time period.
- Can give actual buy/sell signals in changing market
- Show movement which might not be as readily apparent in bar chart
- Swing failures above 70 or below 30 = warning of coming reversal
- Show support resistance level with greater clarity
- Divergence of RSI and price = useful and reliable reversal indicator. Need to wait for confirmation
after divergence signal before entry.
- RSI need certain amount of lead time in order to operate successfully
- Swing Failures = W formations. When RSI spike down below 30, then move up, then follow by
another spike (less than first) = buy signal as RSI rise to middle W formations.
And vice versa for sell signal.
- Time Periods. Normal RSI 14. Shorter RSI 6 for intraday analysis to find TP point (when RSI >75 and
pullback). Shorter RSI more responsive to show pause in current trend. Some use very sensitive RSI 3
to determine re entry as indicators moves back to neither overbought or oversold (between 70 and
30). RSI 10 weekly chart use in stock bond currency.

- RSI gives three types of trading signals. They are, in order of importance, divergences, chart
patterns, and the level of RSI
- Divergence signal. Bullish divergences when prices fall to a new lower low, but RSI makes a higher
low = Buy Signal as soon as RSI turns up from its second bottom, and SL below the latest minor price
low. Buy signals are especially strong if the first RSI bottom is below its lower reference (30) line and
the second bottom is above that line.
- Charting Patterns signal. RSI trendlines or support resistance are usually broken one or two days
before price trend changes. When RSI breaks above its downtrend line, place an order to buy above
the latest price peak to catch an upside breakout.
- RSI levels signal. Buy when RSI declines below its lower reference line (oversold) in daily and weekly
trend is up. And vice versa