Region Strength Index (RSI)
factor.formula
True Range (TR) =
Volatility Weight (W) =
Normalized Range (SR(N1)) =
Regional Strength Index (RSI(N1, N2)) =
In the formula:
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True Range measures the fluctuation range of the price on the day, taking the maximum value of the difference between the highest and lowest prices of the day, the absolute value of the difference between the previous day's closing price and the highest price of the day, and the absolute value of the difference between the previous day's closing price and the lowest price of the day. In the formula, the subscript t represents the current moment, and the subscript t-1 represents the previous moment.
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Highest price of the day
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Lowest price of the day
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Closing price of the day
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Previous day's closing price
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Volatility weight, when today's closing price is higher than the previous day's closing price, W is the true volatility TR divided by the difference between today's and previous day's closing prices; otherwise, W is equal to the true volatility TR. This weight reflects the strength of price volatility relative to the change in closing price.
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Represents the sequence of W values going back N1 time units from the current time t.
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The period length for calculating the standardized fluctuation range (SR) indicates the window length of the historical W value considered when calculating the SR. The default value is 20.
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Calculates the Exponential Moving Average (EMA) smoothing period of the Regional Strength Index (RSI) used to smooth the Normalized Range SR. The default value is 5.
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Normalized volatility is used to normalize the volatility weight W to between 0 and 100. When the maximum and minimum values of W in the N1 period are not equal, SR is (W - the minimum value of W in the N1 period) divided by (the maximum value of W in the N1 period - the minimum value of W in the N1 period) multiplied by 100; otherwise, SR is (W - the minimum value of W in the N1 period) multiplied by 100. The purpose is to normalize the volatility weight value to a fixed range.
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The Regional Strength Index is an N2-period exponential moving average of the Normalized Range SR (N1). It combines the range and closing price changes to identify potential trend turning points. The indicator is more sensitive to price fluctuations and smooths out fluctuations, better indicating potential shifts in trends.
factor.explanation
The Regional Strength Index (RSI) identifies the beginning and end of trends by analyzing the relationship between the true range and the closing price changes. A high indicator value means that the price fluctuations are larger relative to the closing price changes, which may indicate a reversal of the trend. The RSI is an oscillator indicator that can identify potential buy or sell signals by combining the fluctuations of the true range and the closing price, especially when the indicator value reaches extreme highs or lows. The indicator combines the concept of true range and uses an exponential moving average (EMA) for smoothing to reduce noise and identify potential trending changes. A high RSI value usually indicates that the market is overbought and may be due for a pullback; a low RSI value may indicate that the market is oversold and may rebound. The RSI is mainly used to assist in determining trends and identifying potential overbought and oversold areas.