Relative Strength Index (RSI) is a momentum indicator that analyzes the degree of recent gains/losses with hopes of learning the overbought and oversold conditions of a stock. It is calculated as follows:
RSI =100 - (100/(1+RS))
RS = Average of x days up closes / Average of x days down closes
RSI is plotted on a 0 to 100 scale. Above 70 is considered overbought and under 30 is considered over sold. This momentum indicator is used by Traders in stock trading, options trading, and futures trading.
Related terms: Simple Moving Average, Exponential Moving Average, Moving Average Convergence Divergence, Moving Average