In his 1978 book “New Concepts in Technical Trading Systems” J. Welles Wilder Jr. presented several methods and trading techniques which became classic. In that book Mr., Wilder introduced one of the most widely used technical oscillators today: The Relative Strength Index (RSI for short). Nowadays all kinds of technical analysis software offer the RSI as a build-in oscillator.
This is an enhanced and extended version of my article “Dissecting the RSI” which first appeared in the Technical Analyst publication and later in the Hispatrading magazine.
The actual rsi formula
According to Welles Wilder, the RSI of k periods is defined as:
where AUC(k) is the (2k-1) exponential moving average of UC and ADC(k) is the (2k-1) exponential moving average of DC.
UC and DC are defined as follows:
where, C and C-1 are the closing price of a price...
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