RSI is an oscillator indicator used for technical analysis and it means relative strength index.
In June of 1978, Welles Wilder developed the Relative Strength Index, providing step by step instructions and full explanations for its use. It caused hundreds of of forex traders to use it and thousands more still use it today obtaining good results.
RSI is an indicator that compares a given time, the individual moves up or down in the market and identify overbought and oversold conditions of a given pair. The RSI is an oscillator that provides trade signals before they occur in the market.
In other words, the RSI allows you to compare the two averages and it is expressed as a percentage. If the average of low and highs are equal, the RSI has a value of 50%, this means that the relative strengths are balanced. However, if the value of the RSI is above 50% it means that there is more rising strength than relative bear strength, and if it is less than 50% it means that there is more bearish strength than bullish.
The RSI is considered to work most effectively in ranging markets (none trending), but you must remember that as any other technical indicator, signals must be confirmed with other indicators for them to work optimized.
The RSI is calculated using the following formula:
RSI = 100 – 100
______
1 + RS
RS = Daily Average of upward closures / Daily Average of Downward closures
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