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.
RSI = 100 – (100/(1 + RS))
RS = average of x days up closes / Average of x days down closes**
Below is an example of the Relative Strength Index, with the average period length set to 2 days.
Connors Research Trading Strategy Series Guidebook: The 2-Period RSI Pullback Trading Strategy
Use the TradingMarkets 2 Period RSI Solver to identify entries or exits.
* 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.