Cutlers RSI (Relative Strength Index)
Cutlers RSI is a simple moving average based version of the popular Relative Strength Index momentum oscillator which was developed by J. Welles Wilder and detailed in his book New Concepts in Technical Trading Systems. It analyses Average Gains and Average Losses to measure the speed and magnitude of price movements.
The RSI is always between 0 and 100, with stocks above 70 considered overbought and stocks below 30 oversold. Divergence between the price and RSI can also be analysed for potential reversals.
RS = Average Gain in the Period / Average Loss in the Period
RSI = 100 - (100 / (1 + RS))
Average Gain is calculated as an SMA of the gains in the Period. The Average Loss is similarly calculated using Losses.
RSI - Relative Strength Index