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You are here: Home / Glossary / Relative Strength Index (RSI)

Relative Strength Index (RSI)

The Relative Strength Index or RSI is a popular momentum oscillator developed by J. Welles Wilder* in the 1970s. The RSI compares the magnitude of a market’s recent gains to the magnitude of a market’s recent losses.

A simple formula calculates this price action into a number between 1 and 100. Markets with RSIs closer to 1 are considered oversold. Markets with RSIs closer to 100 are considered overbought.

RSI = 100 – (100/(1 + RS))

RS = average of x days up closes / Average of x days down closes*

Learn more about the Relative Strength Index from J. Welles Wilder’s original text: New Concepts in Technical Trading Systems

* The above definition of the Relative Strength Index comes from the book, High Probability ETF Trading, by Larry Connors and Cesar Alvarez.

Buy The Fear, Sell The Greed

Buy The Fear, Sell The Greed

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We’re excited to announce the release of a new investment book written by Larry Connors and Chris Cain, CMT. The book, “The Alpha Formula; High Powered Strategies to Beat The Market With Less Risk “ combines… Hedge fund legend Ray Dalio’s brilliant insight into combining uncorrelated strategies… With new, minimally correlated, quantified, systematic strategies to trade… [Read More]

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Connors Research Traders Journal (Volume 57): 7 Real-World Reasons Why Short Strategies Should Be Included In Your Portfolio

In our new book, The Alpha Formula – High Powered Strategies to Beat the Market with Less Risk, we show the benefits of including short-strategies in your portfolio. As a reminder, building portfolios should be based on First Principles – otherwise known as truths. These truths are: Markets Go Up Market Go Down Markets Go… [Read More]

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