RSI - Relative Strength Index

This commodity futures and stock indicator was developed by Welles Wilder Jr. Relative Strength Index is often used to identify price tops and bottoms by keying on specific levels, usually thirty and seventy on the RSI chart which is scaled from from zero to one hundred. The study is also useful to detect the following:

-Movement which might not be as readily apparent on the bar chart
-Failure swings above 70 or below 30 which can warn of coming reversals
-Support and resistance levels
-Divergence between the RSI and price which is often a useful reversal indicator
-The Relative Strength Index requires a certain amount of lead-up time in order to operate successfully.

The formula for calculating the RSI is:

rsi=100-(100/1-rs)
rs= average of x day's up closes divided by average of x day's down closes

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