Relative Strength Index

This help section explains the Relative Strength Index indicator, not the Relative Strength indicator. The relative strength index is an indicator created by J. Welles Wilder, Jr. The calculation is performed as follows:

Assume a relative strength index number of bar’s value of 14 (the program’s default).

For the initial relative strength index value, if a bar closes up from the previous bar, add the difference between the current bar’s close and the previous bar’s close to a cumulative sum. For example, if a previous bar’s close is 45.25 and the current bar’s close is 46.0, you would add 0.75 to your cumulative number of up closes. Similarly, if a bar closes down from the previous bar, add the difference between the current bar’s close and the previous bar’s close to a cumulative sum. For example, if a previous bar’s close is 48.25 and the current bar’s close is 47.0, you would add 1.25 to your cumulative number of down closes. Do this for the first 15 bars.

You then divide both the sum of the up closes and the sum of the down closes by 14 to get the Average Up and Average Down values.

Next divide the Average Up by Average Down. Add one to this value and then divide 100 by this value.

The formula looks like this:

Average Up = the sum of the number of up closes / 14

Average Down = the sum of the number of down closes / 14

RSI = 100.0 / (Average Up / Average Down + 1.0)

After the initial relative strength value, we calculate the Average Up by multiplying the previous bar’s Average Up value by 13, adding the amount of today’s bar up close, if any, and then dividing this value by 14. Similarly, we calculate the Average Down by multiplying the previous bar’s Average Down value by 13, adding the amount of today’s bar down close, if any, and then dividing this value by 14. This provides a smoothing factor into the equation.

The rest of the RSI calculation proceeds as above.

**Reference:** Wilder, J. Welles, Jr.* New Concepts in Technical Trading Systems*. Winston-Salem, NC: Hunter Publishing Company., 1978.