The RSI indicator works by comparing two different measurements. The first measurement is price gains on up days. Up days are defined as days closing higher than the previous day’s close. The second is price losses on down days. Down days are defined as days closing lower than the previous day’s close.
How to calculate RSI?
RSI is automatically calculated using the best charting software, such as TrendSpider or TradingView. But if you want to calculate RSI yourself, read on. The RSI indicator is calculated using the following formula: RSI = 100 – (100 / (1 + RS)) Where “RS” is the Relative Strength Index.
How does the RSI work?
The RSI works best in trading ranges rather than trending markets. As a momentum indicator, the relative strength index compares a security's strength on days when prices go up to its strength on days when prices go down. Relating the result of this comparison to price action can give traders an idea of how a security may perform.
