Relative Strength Index
The Relative Strength Index measures the magnitude of recent price changes. This is a momentum indicator and it compares current conditions with the weakest and strongest points in the market. It can tell you whether an instrument is overbought or oversold.
If the Relative Strength Index is under 30, it means that the asset has been oversold. If it’s over 70, then the instrument has been overbought. In either case, you can expect a reversal.
Calculation of Relative Strength Index
The Relative Strength Index indicator uses this formula:
RVI = (CLOSE-OPEN)/(HIGH-LOW)
These symbols are used in the formula:
OPEN – is the opening price;
HIGH – is the maximum price;
LOW – is the minimum price;
CLOSE – is the closing price.