RSI

Interpretation

The Relative Strength Index (RSI) is a popular oscillator, used by commodity traders. It was first introduced by J. Welles Wilder.
The name "Relative Strength Index" is slightly misleading as the RSI does not compare the relative strength of two securities, but rather the internal strength of a single security. A more appropriate name might be "Internal Strength Index".
The RSI is a fairly simple formula.

RSI = 100 - [100 / (1 + U / D)]

Where:

U - An average of upward price change.
D - An average of downward price change.

When Wilder introduced the RSI, he recommended using a 14-day RSI. Since then, the 9-day and 25-day RSIs have also gained popularity. Because you can vary the number of time periods in the RSI calculation, we suggest that you experiment to find the period that works best for you. (The fewer days are used to calculate the RSI, the more volatile the indicator is). The RSI is a price-following oscillator that ranges between 0 and 100. A popular method of analyzing the RSI is to look for divergence in which the market index is marking a new high, but the RSI is failing to surpass its previous high. This divergence would be an indication of an impending reversal. When the RSI then turns down and falls below its most recent trough, it is said to have completed a failure swing. The failure swing would be considered a confirmation of an impending reversal.

• Tops and Bottoms. The RSI usually tops above 70 and bottoms below 30. The RSI usually forms these tops and bottoms before the underlying price chart.
• Chart Formations. The RSI often forms chart patterns (such as head and shoulders or rising wedges) that may or may not be visible on the price chart.
• Failure Swings. (Also known as support or resistance penetrations or breakouts). This is where the RSI surpasses a previous high (peak) or falls below a recent low (trough).
• Support and Resistance. The RSI shows, sometimes more clearly than the price chart, levels of support and resistance.
• Divergence. As it was above discussed , it occurs when the price makes a new high (or low) that is not confirmed by a new RSI high (or low).

Parameters

• Price - Enter the number of time periods to use when calculating Detrended Price Oscillator. The term "time periods" refers to days if the chart contains data, weeks for weekly data, hours for hourly data, etc.
• Periods - Specify the number of periods to use when calculating. The term "time periods" refers to days if the chart contains daily data, weeks for weekly data, hours for hourly data, etc.
• Buy Zone - Specify here buying limit. After which overbought will occur.
• Sell Zone - Specify here selling limit. After which oversold will occur.

Recommand Setting for RSI