RSI

What this unit covers

Learn to calculate RSI from average gains and losses, and read a high or low reading as a clue about recent momentum, not a buy or sell signal.

By the end you will be able to

• Explain what RSI measures about recent price movement.
• Calculate RSI by hand from a series of daily price changes.
• Interpret a high or low RSI reading without treating it as a buy or sell signal.

How it starts: A Number on the Screen

1. You watch a stock you follow climb for five straight sessions.
2. An app flags it at 68, close to a line marked overbought at 70.
3. Does that number know what happens tomorrow, or only what already happened?

Words you will meet

RSI

A 0 to 100 number that compares how strong recent price gains have been against recent losses.

Relative Strength (RS)

The raw ratio of average gain to average loss, before it is rescaled into RSI.

Momentum

How fast and how strongly a price has been moving in one direction recently.

In this module: Technical Indicators

1. Moving Averages & Bollinger Bands
2. RSI (this unit)
3. MACD
4. VWAP