RSI Calculation - Macroption

RSI Formula · RSI = 100 ? 100 / ( 1 + RS ) · RS = Relative Strength = AvgU / AvgD · AvgU = average of all up moves in the last N price bars · AvgD = average of all ... Macroption Get a Calculator Sign In Tutorials Calculators Services About Contact Tutorials Calculators Services About Contact Sign In Get a Calculator All»TutorialsandReference»TechnicalAnalysis»RelativeStrengthIndex(RSI) RSICalculation YouareinTechnicalAnalysis»RelativeStrengthIndex(RSI) RSICalculation RSIValueRangeandInterpretation RSIPeriodLengthEffect RSIOverboughtandOversoldCondition RSIOverbought-OversoldwithConfirmation RSIDivergence MoreinTechnicalAnalysis AverageTrueRange(ATR) RelativeStrengthIndex(RSI) MovingAverages MACD(MovingAverageConvergence-Divergence) MoreinTutorialsandReference Options101:BeginnerTutorial OptionPayoffExcelTutorial OptionStrategies OptionGreeks Black-ScholesModel BinomialOptionPricingModels Volatility VIXandVolatilityProducts TechnicalAnalysis StatisticsforFinance OtherTutorialsandNotes Glossary This?pageisadetailedguidehowtocalculateRelativeStrengthIndex(RSI).YoucanseehowtheformulasworkinExcelintheRSICalculator.Thecalculationisexplainedindetailinchapter4ofthecalculator'sguide. Onthispage:RSIFormulaRSICalculationStepbyStepStep1:?CalculatingUpMovesandDownMovesStep2:AveragingtheAdvancesandDeclinesSimpleMovingAverageExponentialMovingAverageWilder'sSmoothingMethodStep3:CalculatingRelativeStrengthStep4:CalculatingtheRelativeStrengthIndex(RSI)LowestPossibleRSIValueHighestPossibleRSIValueComparingtheCalculationMethods RSIFormula RSI=100?100/(1+RS) RS=RelativeStrength=AvgU/AvgD AvgU=averageofallupmovesinthelastNpricebars AvgD=averageofalldownmovesinthelastNpricebars N=theperiodofRSI Thereare3differentcommonlyusedmethodsfortheexactcalculationofAvgUandAvgD(seedetailsbelow) RSICalculationStepbyStep Calculateupmovesanddownmoves(getUandD) Averagethe?upmoves?and?downmoves?(getAvgUandAvgD) Calculate?RelativeStrength(getRS) CalculatetheRelativeStrengthIndex(getRSI) Step1:?CalculatingUpMovesandDownMoves We'llillustratethecalculationofRSIontheexampleofthemostcommonperiod,14.ForRSIcalculationyouneedclosingpricesofthelast15days(forRSIwithaperiodof10,youneedthelast11closingpricesetc.). Let'sstartwithcalculatingtheupmovesanddownmovesinthelast14days(or14pricebarsingeneral). First,calculatethebar-to-barchangesforeachbar:Chng=Closet–Closet-1 Foreachbar,upmove(U)equals: Closet–Closet-1ifthepricechangeispositive Zeroifthepricechangeisnegativeorzero Downmove(D)equals: TheabsolutevalueofCloset–Closet-1ifthepricechangeisnegative Zeroifthepricechangeis?positiveorzero TheseupanddownmovesarecalculatedincolumnsCandDintheRSICalculator. NowyouhavethefirstimportantinputfortheRSIformula,theincreasesanddeclinesinthelastNdays(withNbeingtheRSIperiod).Thenextstepistoaveragethem. Step2:AveragingtheAdvancesandDeclines Threedifferentapproachesarecommonlyused.Theydifferinthewayhowaverageupanddownmovesarecalculated: SimpleMovingAverage ExponentialMovingAverage Wilder'sSmoothingMethod SimpleMovingAverage Underthismethod,whichisthemoststraightforward,AvgUandAvgDarecalculatedassimplemovingaverages: AvgU=sumofallupmoves(U)inthelastNbarsdividedbyN AvgD=sumofalldownmoves(D)inthelastNbarsdividedbyN N=RSIperiod ExponentialMovingAverage HereAvgUandAvgDarecalculatedfromupmovesanddownmovesusinganexponentialmovingaverageinthesamewayasyouwouldcalculateanEMAofprice.TheEMAperiodistheRSIperiod.?Theformulais: AvgUt=?*Ut+(1–?)*AvgUt-1 AvgDt=?*Dt+(1–?)*AvgDt-1 ?=2/(N+1) N=RSIperiod Wilder'sSmoothingMethod J.WellesWilder,theinventorofRSI,calculatedtheindicatorusingasmoothingmethodwiththesamelogicasanexponentialmovingaverage,onlythesmoothingfactorisdifferent: ?=1/N andtherefore1–?=(N–1)/N N=RSIperiod Forexample,forRSI14theformulaforaverageupmoveis: AvgUt=1/14*Ut+13/14*AvgUt-1 YouwillfindthelogicofthesecalculationsisverysimilartothecalculationofAverageTrueRange(ATR),anotherindicatorinventedbyJ.WellesWilder. Step3:CalculatingRelativeStrength Nowasyouhavetheaverageupmove(AvgU)andaveragedownmove(AvgD)inthelast14pricebars,thenextstepistocalculateRelativeStrength,whichisdefinedastheratioofaverageupmovesandaveragedownmoves. RS=AvgU/AvgD Step4:CalculatingtheRelativeStrengthIndex(RSI) Finally,weknowtheRelativeStrengthandwecanapplythewholeRSIformula: RSI=100?100/(1+RS) LowestPossibleRSIValue WhatsituationinthemarketwouldgiveusthelowestpossibleRSIvalue?Atotallybearishmarket,ofcourse.Imaginethateverysingledaythemarketclosedlowerthanthedaybefore.Therewouldbenoupdays(alltheU'sinthelastNbarswouldbezero).AvgUwouldbezero(forSMAmethodimmediatelyafterNbars,forEMAandWilder'smethodsitwouldgraduallyapproachzerowitheachbariftherehadbeennon-zeroU'sbefore).Theaveragedecline(AvgD),ontheotherhand,wouldbesomepositivenumber(asyoutakeabsolutevalueswhencalculatingtheRSI).RelativeStrengthwouldbezerodividedbysomethingpositive,whichgivesuszero.TheRSIwouldbezero: RSI=100?100/(1+0)=100?100=0 HighestPossibleRSIValue WhatsituationinthemarketwouldgiveusthemaximumpossibleRSIvalue?Thiswouldbeatotallybullishmarketwithnodowndays.AvgDwouldbezero,AvgUsomepositivenumber.RelativeStrengthwouldbesomethingpositivedividedbyzero.Mathematically,youcan'tcalculatethis?inthiscasetheRSIvalueisdefinedas100.Iftheaveragedeclinewouldbesomeverylownumber,butnotzero,RelativeStrengthwouldbeclosetoinfiniteandtheRSIwouldbecloseto100: RSI=100?100/(1+abignumber)=100?0=100 Toconclude,RSIcanreachvaluesfrom0(bearishmarket)to100(bullishmarket). ComparingtheCalculationMethods Thethreecalculationmethodsoftengivequitedifferentresults.Whiledifferenttradershavedifferentpreferences,mostwouldagreethatbeingconsitentandstickingwithonemethod(ratherthanjumpingfromonetoanother)ismoreimportantthanwhichofthemethodsyouchoose(thisalsoappliestoRSIperiodlength). TheRSICalculatorallowsyoutoputupto3differentRSIindicatorsonthechartatthesametime,soyoucancomparehowdifferentsettingslooksinthesamesituation(foractualtradingitisbettertousejustone,maybetwoindicatorssimultaneously).FurtherexplanationofRSIcalculationmethodsandpracticaluseisavailableinthecalculator'sguide. All»TutorialsandReference»TechnicalAnalysis»RelativeStrengthIndex(RSI) RSICalculation RSIValueRangeandInterpretation RSIPeriodLengthEffect RSIOverboughtandOversoldCondition RSIOverbought-OversoldwithConfirmation RSIDivergence MoreinTechnicalAnalysis AverageTrueRange(ATR) RelativeStrengthIndex(RSI) MovingAverages MACD(MovingAverageConvergence-Divergence) MoreinTutorialsandReference Options101:BeginnerTutorial OptionPayoffExcelTutorial OptionStrategies OptionGreeks Black-ScholesModel BinomialOptionPricingModels Volatility VIXandVolatilityProducts TechnicalAnalysis StatisticsforFinance OtherTutorialsandNotes Glossary Topofthispage Home Tutorials Calculators Services About Contact Byremainingonthiswebsiteorusingitscontent,youconfirmthatyouhavereadandagreewiththeTermsofUseAgreement. Wearenotliableforanydamagesresultingfromusingthiswebsite.Anyinformationmaybeinaccurateorincomplete.SeefullLimitationofLiability. 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