24 basic indicators (1) -- RSI

Relative Strength Indicator-RSI

The relative strength index (RSI) is also called a strength index. It is called a "Relative Strength Index" in English and is determined by Wells? The product created by Welles Wilder charts is a medium-and short-term indicator commonly used in stock market technical analysis.

Section 1 principles and calculation methods of RSI indicators

I. Principles of RSI indicators

The relative strength index RSI is based on the principle of balance between supply and demand in the stock market, analyze and determine the strength of the trading force of multiple empty sides in the market by comparing the price increase and decrease of a single stock in a period of time or the index increase and decrease of the entire market, this is a technical indicator used to determine future market trends.
According to its construction principle, similar to trend indicators such as macd and Trix, the RSI index analyzes the basic changes of a single stock or the entire market index, unlike macd and Trix, the RSI index is used to determine the closing price of a single stock at several times or the strength of the closing index at several times, instead of directly smoothing the stock closing price or stock market index.
The relative strength index RSI is the ratio of market increase to increase and decrease in a certain period of time. It is the embodiment of sales force in quantity and graphics. Investors can predict future stock price trends based on the market changes and tracks they reflect. In practice, people usually use it with the moving average to improve the accuracy of market prediction.

Ii. Calculation Method of RSI indicators

There are two formulas for calculating the relative strength index RSI:
1:
Assume that a is the sum of positive values of the closing price within n days, and B is the sum of negative values of the closing price within n days multiplied by (-1)
In this way, both A and B are positive, and A and B are substituted into the RSI formula
RSI (n) = a percentile (a + B) × 100
Second:
RS (relative strength) = the increase in the closing price in N days and the mean of the decrease in the closing price in N days
RSI (Relative Strength Indicator) = 100-100 percentile (1 + RS)
Although the two formulas are somewhat different, the calculation results are the same.
Take the RSI index on the 14th as an example. Based on the hourly calculation, 15 closing prices, including the current day, are reversed. The closing price of each day minus the closing price of the previous day, and 14 values are obtained, these values are positive and negative. The formula for calculating RSI indicators is as follows:
A = the sum of 14 digits in positive numbers
B = the sum of the negative numbers in 14 digits multiplied by (-1)
RSI (14) = a percentile (a + B) × 100
Formula: A is the upward fluctuation of the stock price in 14 days.
B is the downward fluctuation of the stock price during the 14-day period.
A + B is the overall fluctuation of the stock price.
The formula of RSI actually reflects the percentage of fluctuations in a certain phase of price increase as a percentage of the total fluctuation. The larger the percentage, the more obvious the strength. The smaller the percentage, the more obvious the weakness. The value of RSI is between 0 and. After calculating the RSI value of a day, you can use the smooth calculation method to calculate the RSI value. Based on the RSI value, the curve is connected to the Coordinate graph, that is, the RSI line.
Take the day as an example. The RSI value is generally calculated on the 5th, 10th, and 14th days. In addition, the calculation cycle is 6, 12, and 24. Generally, if the number of days in a short cycle is used, the response to the RSI index may be sensitive; if the number of days is long, the response may be slow. Currently, the benchmark period used by RSI in Shanghai and Shenzhen stock markets is day 6 and Day 12.
Similar to the calculation of other indicators, the selected calculation cycle is different, RSI indicators include daily RSI indicators, weekly RSI indicators, monthly RSI indicators, and minute RSI indicators. The daily RSI and weekly RSI indicators are often used for stock market research. Although their values are different during calculation, the basic calculation method is the same. In addition, with the development of software analysis technology in the stock market, investors only need to master the basic principles and calculation methods formed by RSI, and do not need to calculate the index value, more importantly, we use RSI indicators to analyze and determine stock quotations.

Section 2 General RSI judgment criteria

The RSI analysis and determination mainly focus on the value of RSI, the crossover of long-term RSI and short-term RSI, and the curve shape of RSI. The general analysis methods mainly include the RSI value range, RSI value overselling and overpurchasing, long and short-term RSI line position and crossover.

I. RSI Value

The range of RSI changes is between 0--100, and the intensity indicator value is generally distributed in 20--80. (2-1.
RSI value market feature investment operations
80-strong selling
Top 50-80 buyers
20--50 weak wait-and-see
0-20 extremely weak purchases
Figure (2-1) RSI metric values
Here, "strong", "strong", "weak", and "extremely weak" are just relative analysis concepts and are relative regions. Some investors can also set them to 30, 70, 15, or 85. In addition, for the different parameters of the obtained RSI and the different stocks, the RSI value size will be different, and the following sections will be further detailed.

Ii. superbuy and supersale of RSI values

Generally, the value of RSI over 80 and below 20 are the boundary of the overbought and oversold areas.
1. When the RSI value exceeds 80, it indicates that the entire market is too strong. The strength of multiple parties is far greater than that of the empty parties. The strength of the two sides is sharply different, and the market is in the superbuy status, in the future, there may be a callback or trend. At this time, investors can sell stocks.
2. When the RSI value is lower than 20, it indicates that more disks are sold in the market than buyers, and the empty side is stronger than the multiple sides. After the empty side makes a big attack, the market has fallen too much and is already oversold, the stock price may rebound or change in trend. Investors can set up a proper amount of warehouses and buy stocks.
3. When the RSI value is around 50, it indicates that the market is in a sorted state. Investors can wait and see.
4. For the definition of overbought and oversold zones, investors should decide based on the specific market conditions. Generally, the RSI value above 80 can be referred to as the overbought zone, and the RSI value below 20 can be referred to as the oversold zone. However, in the special Rise and Fall market, the division of RSI's oversold and overbought zones depends on the specific situation. For example, in a bull market or for a bull stock, the overbought zone can be set to more than 90, while in a bear market or for a bear stock, the oversold zone can be set to less than 10 (this is relative to the RSI with a small parameter setting. If the parameter setting is large, it is difficult for the RSI to reach more than 90 and less than 10 ).

Iii. Crossover of long and short-term RSI lines

Short-term RSI refers to RSI with relatively small parameters, and long-term RSI refers to RSI with relatively long parameters. For example, in RSI 6 and RSI 12, RSI 6 is short-term RSI and RSI 12 is long-term RSI. The crossover of long and short-term RSI lines can be used as a way for us to determine the market.
1. When short-term RSI> long-term RSI, the market belongs to the multi-headed market;
2. When short-term RSI <long-term RSI, the market belongs to the short market;
3. When the short-term RSI line breaks through the long-term RSI line at a low level, it is generally the "Golden crossover" of the RIS indicator, which is the buying signal;
4. When the short-term RSI line breaks down the long-term RSI line at a high position, it is generally the "death crossover" of the RSI indicator, which is the selling signal.

Section 3 Special Analysis Methods of RSI

I. Shape of RSI Curves

When the RSI index is in the high position or the low position horizontal disk, the various forms are also used to judge the market, which is an analysis method that determines the sales operation.
1. When the RSI curve is at a high position (50 or more) to form an M-headed or triple-topped reverse, this means that the rising momentum of the stock price has been exhausted and the stock price may be subject to a long-term reversal, investors should sell shares in a timely manner. If the stock price trend curve has also appeared in the same form, it can be more confirmed. The magnitude and process of the stock price decline can be determined by referring to the m head or the three-heavy top and other top reversal forms.
2. When the RSI curve forms a low position (below 50), such as a low bottom or a triple bottom, it means that the decline momentum of the stock price has weakened, and the stock price may build a medium-and long-term bottom, investors can build warehouses in batches at low prices. If the stock price trend curve has also appeared in the same form, it can be confirmed that the rise of the stock price and the process can be determined by referring to the bottom W or triple bottom and other bottom reversal forms.
3. The reverse form at the top of the RSI curve is more accurate than the bottom form for market judgment.

Ii. Deviation from the RSI Curve

RSI indicator deviation refers to the trend of the RSI indicator curve, which is exactly the opposite of the trend of the stock price line chart. There are two types of RSI indicators: Top deviation and bottom deviation.

(1) Top Deviation

When the RSI is at a high level, but after hitting a recent high of the RSI, it forms a trend of one-to-one peak, while the share price on the K-line chart hits a new high, forming a trend of one-to-one peak, this is the top deviation. The top deviation is generally a signal that the stock price is about to reverse at a high position, indicating that the stock price is about to fall in the short term, which is a sell signal.
In the actual trend, the top deviation of the RSI index means that when the stock price rises, a new high point is created first, and the RSI index is also created at a new high point over 80, the stock price has been adjusted to a certain extent, and RSI has also adjusted as the stock price falls. However, if the stock price goes up again and goes above the previous high point to create a new high point, and RSI goes up as the stock price rises, but it starts to fall back without hitting the previous high point, this forms the top deviation of RSI indicators. After the RSI returns to the top, the stock price may fall to the top, which is a strong selling signal.

(2) Bottom Deviation

The bottom deviation of RSI usually occurs in the lower-level zone of 20. When the share price on the K-line chart drops all the way, it forms a wave of low-frequency trend, while the RSI line is at a low position, but it is the first to stop falling and stabilize, and form a bottom-to-bottom high trend. This is the bottom deviation. Bottom deviation generally indicates that the stock price may rebound in the short term, which is a signal of short-term purchases.
Like the deviation between macd, RSI, and other indicators, the accuracy of top deviation is higher than that of bottom deviation. When the stock price is at a high level and RSI is at or above 80, it can be considered that the stock price is about to reverse, and investors can sell the stock in time; while the stock price is at a low level, RSI also has a bottom deviation at a low position. Generally, it must be repeated several times before confirmation. In addition, investors can only establish strategic warehouses or make short-term investments.

3. Parameter Modification

From the calculation method of RSI indicators, we can see that RSI indicators are based on time. The time period of the parameters can be day, month, week, year, or minute, based on the length of Stock Market time and the trade-offs between investors, these time periods can theoretically take any length of time. However, in most stock market analysis software, the change scope of various time periods is limited to 1-99, for example, 1 day-99 Day, 1 week-99 Week.
According to the actual use of RSI indicators, the time period parameters selected by most investors are daily, while the use of daily RSI index parameters is, most of them are limited to a few parameters such as day 6 and Day 12. If the stock trend is analyzed based on these short-term parameters, most of the changes in the RSI indicators are between 40 and 80, and the fluctuation frequency is too cumbersome. In such a small space, it is not easy to use the RSI curve to accurately determine the market trend. Therefore, investors should make full use of the various short, medium, and long-term parameters provided by stock market analysis, combined with stock market theories such as the K line and moving average to comprehensively judge the trend of stocks. In the following chapter, we will try to solve this problem by using different index parameters to correspond to different trading opportunities.

Section 4 practical skills of RSI indicators

Compared with other indicators, RSI indicators fluctuate frequently, and the trend is not obvious. In actual Analysis and Determination of stock market conditions, investors are often confused and unordered. To solve this problem, the two groups of different daily () and daily () parameters of the analyst's stock market analysis software are used to describe the sales prediction function of RSI indicators.

I. Sales Signals

(1) sales functions combined with RSI on the 12th and RSI on the 7th

1. When the RSI curve in the vicinity of 50 on the 12th broke through the RSI curve on the 7th to form a "golden cross", it indicates that the multi-headed power of the stock is stronger than the short power, and the stock price will be greatly increased, this is the midline purchase signal indicated by the RSI indicator. Especially when the stock price also brings the amount up and beyond the medium-and long-term average, this purchase signal is more accurate. At this time, investors should be able to buy stocks at bargain hunting. (2-2.
2. When the RSI curve on the 12th day and the RSI curve on the 72th day run for a long time above 60 values, once the RSI curve on the 12th breaks through the 72-day curve to form a "dead cross", it indicates that the multi-headed forces have been weakened and the stock price will begin to fall sharply, which is a short-term sales signal indicated by the RSI indicator. This selling signal is more accurate, especially for stocks that have increased too much in the early stage. At this time, investors should promptly clearance the site. (2-3.
3. When the RSI curve on the 12th and the RSI curve on the 7th day fall down from the high point to the vicinity of 50, once the RSI curve on the 12th day falls down to the RSI curve on the 7th day, it means that the multi-headed forces are weak, the short position starts to become powerful, and the stock price will face a sharp drop, which is a signal for the mid-line sales indicated by the RSI indicator. This selling signal is even stronger, especially for stocks with high disks. At this time, investors should also stay on the sidelines. (2-4.

(2) sales functions combined with RSI on the 9th and 12th

1. When the RSI curve on the 9th and 12th is below the 50 value, the multi-empty balance line of the RSI index almost exceeded the 50 value at the same time, it indicates that the multi-head power of the stock began to increase, the stock price will climb up, which is also the midline buying signal indicated by the RSI indicator. Especially when the stock price in the current period has been sorted out in a small price range, and the amount of traffic is broken through, this purchase signal is more accurate. At this time, investors should and when to buy stocks. (2-5.
2. When the RSI curve on the 9th and the RSI curve on the 12th run above the 80 value, once the RSI curve on the 9th and the RSI curve on the 12th almost break down the 80 line at the same time, it indicates that the power of the stock bulls is getting weak and the stock price is facing downward adjustment pressure. This is the short-term sales signal indicated by RSI. This selling signal is even stronger, especially for stocks that have increased significantly in the short term. At this time, investors should wait and see in a short time. (2-6.
3. When the RSI curve on the 9th and the RSI curve on the 12th fall down from a high position to the vicinity of 50, if the two lines cannot return up again in the short term, once the RSI curve on the 9th and the RSI curve on the 12th go down to 50, it means that the bear power is getting stronger, and the stock price is likely to fall sharply. This is also the midline selling signal indicated by the RSI indicator. Especially for stocks with high disks, this sales signal is more intense. At this time, investors should also stay on the sidelines. (2-7.

Ii. Currency Ownership Signal

(1) shareholding and currency holding functions combined by RSI on the 12th and RSI on the 7th

1. When the RSI curve on the 12th day exceeded the RSI curve on the 72-day in the middle (around 50), if the two curves run upwards simultaneously and the stock price carries traffic, this indicates that the multi-headed force has an absolute advantage and the stock price will continue to rise. This is a signal that the RSI index is relatively obvious and the stock is waiting to rise. At this time, investors should firmly hold their shares and wait until the RSI indicator sends a short-term sales signal. (2-8.
2. When the RSI curve on the 12th breaks through the 72-day curve at a medium height (more than 60) and remains below the 72-day curve, this means that the multi-headed power may be weak, the short-headed power may begin to increase, and the stock price will be adjusted downward. This is the wait-and-see signal indicated by the RSI index. This kind of currency hold signal is more accurate, especially for stocks whose share prices start to fall after high price consolidation. At this time, investors should focus on currency holding. (2-9.
3. When the RSI curve on the 12th breaks through the RSI curve on the 72th day in the middle-high position (more than 50), if the two curves run down simultaneously, it indicates that the multi-headed power has been exhausted and the short-headed power has a significant advantage, and the stock price will begin to fall sharply. This is also the obvious currency holding signal indicated by RSI indicators. At this time, investors should hold the coin to watch. (2-10.
4. When the RSI curve on the 12th and the RSI curve on the 7th fall behind, if the two curves fall below 50 and run down at the same time, it indicates that the bear power is an absolute advantage, the share price will continue to fall, which is also a wait-and-see signal of the RSI indicator. At this time, investors should firmly hold on to the coin. (2-11.

(2) shareholding and currency holding functions combined by RSI on the 9th and 12th

1. When the 9-day RSI curve and the 12-day RSI curve run up almost simultaneously in the middle (about 50), and the stock price also runs up based on the medium-and short-term moving average, it indicates that the multi-headed force is beginning to take the dominant position, and the stock price will start to rise in a round, which is a signal that the RSI index is relatively obvious and the stock is about to rise. At this time, investors should firmly hold their shares and wait until the RSI indicator sends a short-term sales signal. (2-12.
2. When the RSI curve on the 9th and the RSI curve on the 12th were running almost downward at a high position (around 80), it showed that the multi-headed forces were weak and the short-headed forces began to increase, the stock price will be adjusted in a short period, which is a wait-and-see signal indicated by RSI. Especially for stocks that have recently experienced a major increase in the short term, this kind of currency holding signal is even more obvious. (2-13.
3. When the RSI curve on the 9th and the RSI curve on the 12th are near 50, if the two curves almost fall below 50 at the same time and run down, it indicates that the short position is an absolute advantage, the share price will continue to fall, which is also a wait-and-see signal indicated by RSI. This signal is even more obvious, especially for stocks that have risen too much in the early stage. At this time, investors should firmly hold on to the coin. (2-14.