What is RSI ? RSI full form? How the relatives strength index work ?

What is RSI ? RSI full form? How the relatives strength index work ?

What is RSI ?

 RSI stands for "Relative Strength Index," which is a popular technical indicator used in financial markets to measure the strength of a security's price action over a specific period of time. The RSI is typically calculated by comparing the average gains and losses of the security over the chosen time frame, and then expressing the result as a ratio. The resulting value ranges from 0 to 100, with readings above 70 indicating that the security is overbought, and readings below 30 indicating that the security is oversold. The rSI is a variation of the RSI that has been normalized to a scale of 0 to 1, rather than 0 to 100, which some traders find easier to interpret.

RSI

How the RSI woreks ?

The Relative Strength Index (RSI) is a momentum oscillator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in an asset. It is calculated based on the average gains and losses of a security over a specified period of time, which is typically 14 days, although other timeframes can be used as well.

RSI indicator 

The RSI calculation involves several steps:

1.     Calculate the average gain and average loss of the asset over the specified period. The average gain is the sum of all gains over the period divided by the number of periods, while the average loss is the sum of all losses over the period divided by the number of periods.

2.      Calculate the Relative Strength (RS) by dividing the average gain by the average loss. This produces a ratio that reflects the underlying strength of the asset's recent price movements.

3.       Calculate the RSI by converting the RS ratio into a value between 0 and 100. This is typically done using a formula that involves subtracting the RS from 100 and then dividing the result by (1 + RS).

RSI woreks 

Summary:

The resulting RSI value can be used to identify overbought or oversold conditions in the asset. Generally, a reading above 70 indicates that the asset is overbought and may be due for a price correction, while a reading below 30 indicates that the asset is oversold and may be due for a price rebound. Traders can use the RSI in combination with other technical indicators and fundamental analysis to make trading decisions.