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The RSI was invented by Welles Wilder in his book "New Concepts in Technical
Trading Systems" - along with other goodies like the PSAR, the ATR, the
directional movement system (ADX) etc. He defines the RSI as
RSI = 100 - (100/(1+RS)) where
RS = Average of 14 bars up closes/average of 14 bars down closes
BUT he also added smoothing, as he was doing all this by hand, so for the
subsequent bars of calculation he would take the previous average up close,
multiply by 13, add today's up close (if any) and divide by 14. Ditto for
down closes. So his up and down close averages were just over a 7%
exponential average.
SO this is the original, and the one on which a lot of the interpretation is
based.
Andrew
________________________________
From: equismetastock@xxxxxxxxxxxxxxx [mailto:equismetastock@xxxxxxxxxxxxxxx]
On Behalf Of Ron Berlin
Sent: Monday, November 20, 2006 1:16 PM
To: equismetastock@xxxxxxxxxxxxxxx
Subject: [EquisMetaStock Group] RSI calculation
The following is in A...Z as the RSI calculation:
100-(100/(1+(U/D)))
Where
U = an average of upwward price change
and
D = an average of downward price change
My question is how are we getting the average?
Some sources are showing U to be upward price change divided by number of
days of period.
Others show U as Upward price change divided by number of Up days.
There are others as well.
TIA
Ron
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