Relative Strength Index (RSI) ?

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The relative strength index is abbreviated as RSI. It is a critical instrument in technical analysis, measuring the momentum of assets to determine if they are overbought or oversold.


To calculate RSI, use the following formula:


RSI = 100 - 100/(1 + (average up closes/average down closes))


The RSI computation yields a value between 0 and 100. Most analysts feel that an asset nearing 70 is overbought and may be due for a correction, whereas an asset nearing 30 is oversold and may be due for a rise. 


RSI example calculation

Let’s say that over the past month, Asian Paint has finished up an average of 5 points and down an average of 10. Divide 5/10 to make 0.5, then add one to make 1.5. Divide 100 by that number to make 66.66, then minus that from 100.

In this example, the current RSI of Asian Paint is 33.34.

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