RSI is a momentum indicator measuring the change in the magnitude of a security’s price with time. It is expressed as a line graph on a scale of 0 to 100. While 0 is associated with an extremely bearish trend, 100 denotes a highly bullish trend. A security is considered overbought when its RSI is above 70. Conversely, if the RSI is under 30, it’s considered oversold. 

In This Article

• What is RSI? 

• How To Analyse Chart Using RSI

• How To Use Relative Strength Index on KEEV 

Category 

Momentum 

Type 

Leading 

What is the Relative Strength Index? 

The Relative Strength Index (RSI) is a momentum indicator that measures the speed of financial security’s recent price changes. By measuring the speed and magnitude of a security’s recent price changes, RSI evaluates undervalued and overvalued conditions in a security’s price. 

On a scale of 0 to 100, the Relative Strength Index is displayed as a line graph or oscillator. Besides pointing to oversold and overbought securities, this indicator also helps identify securities that may head for a corrective pullback in price or general trend reversal. Here’s how you can calculate RSI. 

Relative Strength Index = 100 - [100/(1 + RS)]

How To Analyse Chart Using Relative Strength Index 

As you can see in the graph above, RSI oscillates between 0 to 100. When it is above 70, it is considered overbought. Conversely, it is considered oversold when it is below 30. Although, RSI may remain in overbought or oversold conditions for stretched periods during strong trends. 

During a downtrend or bear market, the RSI usually stays in the 10 to 60 zone. On the other hand, the RSI tends to remain in the 40 to 90 area in a bullish or uptrend market. In the prior, the 50-60 range acts as resistance. However, the 40-50 range acts as support in the latter. 

Many traders see the RSI crossing above 30 as a potential bullish entry or buy signal. Conversely, when RSI crosses below 70, traders see it as an exit or sell sign. 

How To Use the Relative Strength Index on KEEV 

KEEV allows you to visualise your trading strategy and evaluate it using transactions and metrics. In order to use RSI on KEEV, you’d require the following inputs. 

• Average Gain

It is the average upward price change. That is, it is the sum of gains over the last 14 periods/14. In order to calculate RSI for 14 periods (which is the norm), you need the average gain of a particular security. 

• Average Loss 

Contrary to average gain, the average loss is the average of the downward price change of security over 14 periods. That is, it is the sum of losses over the last 14 periods/14. 

• Relative Strength 

Don’t confuse RS with RSI. It is calculated by dividing the average gain by the average loss.