The Relative Strength Index Technical Indicator (RSI) is a price-following oscillator that ranges between 0 and 100. Describing Relative Strength Index, J. W. Wilder recommended using its 14-period version. Since then, the 9-period and 25-period Relative Strength Index indicators have also gained popularity. A popular method of analyzing the RSI is to look for a divergence in which the security is making a new high, but the RSI is failing to surpass its previous high. This divergence is an indication of an impending reversal. When the Relative Strength Index then turns down and falls below its most recent trough, it is said to have completed a "failure swing". The failure swing is considered a confirmation of the impending reversal.
The following signals of Relative Strength Index are used in chart analyzing:
This is the main formula of Relative Strength Index calculation:
RSI = 100 - (100 / (1 + U / D))
U – the average value of positive price changes;
D – the average value of negative price change.