RELATIVE

STRENGTH INDEX
(RSI)
PART 1 – RELATIVE
STRENGTH INDEX
What is RSI?
RSI was developed by Welles Wilder as an
oscillator to gauge overbought/oversold
levels.
The Relative Strength Index (RSI) is a
momentum indicator used in technical
analysis that measures the magnitude of
recent price changes to evaluate overbought
or oversold.
The RSI is displayed as an oscillator (a line
graph that moves between two extremes)
and can have a reading from 0 to 100.
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What is RSI?
RSI is a very popular momentum oscillator
used by a lot of Technical Analysts.

The RSI provides technical traders signals

about bullish and bearish price momentum

RSI above 70 is generally considered

overbought level whereas below 30 as
oversold level.
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Formula for RSI
The relative strength index (RSI) is
computed with a two-part calculation that
starts with the following formula:

A standard 14-Days period is taken while

calculating RSI
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Formula for RSI

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Formula for RSI
Assuming a 14-period RSI, a zero RSI value
means prices moved lower all 14 periods.

RSI is 100 when the Average Loss equals

zero. This means prices moved higher all 14
periods.

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Formula for RSI
Each Day’s RSI is plotted in the Chart which
ranges from 0 to 100.

Also, realize that stocks can remain

overbought or oversold for long periods of
time, so RSI alone isn’t always a great
timing tool.
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Plotting RSI

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Plotting RSI

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4 Ways On How To use RSI to
Make
BUY / SELL Decisions
Normal Overbought / Oversold Situation

Mid-Line Crosses & Trend Identification

RSI as Support (Entry) & Resistance (Exit)

Strategy
RSI Divergence

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4 Ways On How To use RSI to
Make
BUY / SELL Decisions
Normal Overbought / Oversold Situation

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www.merolagani.com
4 Ways On How To use RSI to
Make
BUY / SELL Decisions
Normal Overbought / Oversold Situation

Mid-Line Crosses & Trend Identification

RSI as Support & Resistance

RSI Divergence

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 This Ends Part 1.

Part 2: Using RSI In Trade

Setup

Thank you!
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