Taking the prior value plus the current value is a smoothing technique similar to that used in calculating an exponential moving average. Despite being developed before the computer age, Wilder's indicators have stood the test of time and remain extremely popular.Īverage Loss = / 14. This book also includes the Parabolic SAR, Average True Range and the Directional Movement Concept (ADX). Wilder features RSI in his 1978 book, New Concepts in Technical Trading Systems. Andrew Cardwell, Brown's RSI mentor, introduced positive and negative reversals for RSI and, additionally, turned the notion of divergence, literally and figuratively, on its head. In particular, Constance Brown's book, Technical Analysis for the Trading Professional, features the concept of bull market and bear market ranges for RSI. RSI is an extremely popular momentum indicator that has been featured in a number of articles, interviews and books over the years. RSI can also be used to identify the general trend. Signals can also be generated by looking for divergences, failure swings and centerline crossovers. According to Wilder, RSI is considered overbought when above 70 and oversold when below 30. Welles Wilder, the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements.
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