Stock Traders Blog

Before I used RSI - Relative Strength Index as a buy and sell indicator I didn’t really understand what it means. Now I lost money on using it and I started to dig into its meaning. Relative Strength Index is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. RSI is calculated using this formula, RSI = 100-(100/(1+RS)). The RS in formula is the ratio of the average ups in the past time interval divided by the average downs in the past time interval. The time interval can be a number of days or a number of hours.

Now I understand that and I don’t think it will be very effective. It could be more effective considering the recent news on the stock abd the over all sentiment of a sector. Well I guess it is easy to say and the hardest part is to turn it into gains.

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