RSI (Relative Strength Index)
Elliott Wave Theory glossary · Elliott Wave Theory
Definition
A bounded momentum oscillator calculated as 100 -100/(1 + RS), where RS is the ratio of average gains to average losses over n periods.
RSI (Relative Strength Index) in plain English
RSI is like a speedometer for price momentum: it doesn't tell you where the price is, but how fast and how one-sidedly it's been moving lately. It compares the size of recent up-moves to recent down-moves and squeezes the result onto a 0-to-100 scale using RSI = 100 - (100)/(1 + RS), where RS is average gains divided by average losses over the last n periods. Because it can never dip below 0 or rise above 100, a high reading (often 70+) hints the crowd may be overexcited and buying is running out of steam, while a low reading (often 30-) hints the opposite. In short, it's a gauge for whether a move has gotten stretched too far, too fast.
Also called: Relative Strength Index
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