RSI Calculation and Common Overbought and Oversold Trading Rules

Summary

This Chinese-language tutorial introduces the Relative Strength Index as a bounded measure comparing average upward and downward price changes over a lookback period. It presents the standard formula and walks through calculating gains and losses from consecutive closing prices, then averaging them over a chosen period. A fourteen-session example is used to illustrate the calculation, and the article includes a Python example for computing and plotting RSI from closing-price data.

The suggested interpretations include conventional overbought and oversold levels, crossings back through those levels as possible reversal cues, and the midpoint as a rough gauge of directional balance. These are heuristics rather than tested results: the document provides no backtest, transaction costs, or risk controls. It notes that RSI should be considered alongside other indicators and market context. Its code uses rolling simple averages, so it does not implement Wilder's smoothed averaging method exactly, despite attributing the indicator to Wilder.

Key ideas

• RSI compares average upward and downward price changes and is scaled from zero to one hundred.
• The tutorial illustrates deriving gains and losses from successive closing prices over a lookback window.
• Common interpretations use upper and lower thresholds for possible overbought and oversold conditions.
• The midpoint is presented as a rough indicator of relative bullish or bearish pressure.
• The sample uses rolling simple averages and supplies no backtest or evidence that the rules are profitable.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.