Relative Strength Index (RSI)

Relative Strength Index (RSI)

Welles Wilder developed the Relative Strength Index (RSI) in 1978, she became one of the most popular tools for technical analysis. More information about RSI can be found in Wilder's book New Concepts in Technical Trading Systems.

Bum began with a 14 day RSI, and on 9 and 25 day RSI is also used widely. We have given examples of all three for this work.

Wilder, too, points to several different interpretive factors that include the following:
• Tops and bottoms are indicated when the RSI rises above 70 or falls below the 30th The index will often do so before the market top or bottom, warning that an important response is to occur.
• Chart formations may appear in the table RSI when they are hidden from the price chart. These include pennants, triangles, double tops and bottoms, head and shoulders, etc.
• Failure Swings over 70 and under 30 for the RSI is strongly indicative of reversal.
• Support and resistance often evident on the RSI before appearing on the price chart.
• divergence between RSI and price chart is a strong indicator of a turning point. This occurs when the RSI rises while the price pattern is level or decreasing, or when RSI is reduced while the price pattern is level or increasing.