The relative strength index is calculated using the following formula:
RSI = 100 – 100 / (1 + RS) , where RS = Average gain of up periods during the specified time frame / Average loss of down periods during the specified time frame/
The RSI provides a relative evaluation of the strength of a security’s recent price performance, thus making it a momentum indicator. RSI values range from 0 to 100. The default time frame for comparing up periods to down periods is 14, as in 14 trading days.
In the attached chart, a possible trade has been identified based on RSI along with Moving Average indicator. A long position is suggested when RSI indicator over sold and the exit position is based on the over bought indication.
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