The strength index was first used in futures trading. Later, in many chart technical analysis, it was found that the theory and practice of intensity index were extremely suitable for short-term investment in the stock market, so it was used to measure and analyze the stock price rise and fall. Foreign exchange trading is similar to futures trading and stock trading in that the rise and fall of exchange rate ultimately depends on the relationship between supply and demand. Therefore, the strength index is also widely used to analyze the foreign exchange market. Later, investors also made the calculation formula of RSI into a computer program, and the operator can get the value of RSI by inputting the exchange rate data into the computer every day. At present, both the chart analysis of Reuters and the chart analysis of Deli Finance can extract the trend chart of RSI.
First, the principle of RSI
The principle of RSI is simply to calculate the strength of buyers and sellers through numerical calculation. For example, there are 100 people facing a commodity. If more than 50 people want to buy and compete to raise prices, the price of goods will definitely rise. On the contrary, if more than 50 people compete to sell, the price will naturally fall.
According to the strength index theory, any sharp rise or fall of the market price is between 0- 100. According to the normal distribution, it is considered that RSI values are mostly between 30 and 70. Usually at 80 or even 90, the market is considered to be overbought, and the market price will naturally fall back and adjust. When the price falls below 30, it is considered oversold and the market price will rebound.
Second, the advantages of RSI measurement method
(1). Can clearly see the intentions of buyers and sellers.
It is clear at a glance when it is overbought and oversold, which makes people better grasp the buying opportunity. However, any analysis tool has its advantages and disadvantages. Technical analysts often warn people that the analysis using RSI should not fall into the quagmire of formulation and mechanization, because everything has special circumstances, and it is not surprising that RSI exceeds 95 or is lower than 15. Don't buy it in the market as soon as it is below 30, and sell it when it is above 70. It should be analyzed in combination with other graphs.
(2) Various graphs that can form histograms.
Such as head and shoulder top, double top and double bottom triangle, flag shape, amplification, support line, resistance line, etc.
The calculation of RSI generally takes 14 days as the cycle, taking the rise as the sum of the buyer's strength and the fall as the sum of the seller's strength, and judging the future trend of the exchange rate is based on the comparison of the two forces.
Third, the calculation of RSI
The calculation formula of strength index is as follows:
RSI = 100-[ 100/( 1+RS)]
Where RS =/kloc-the average value of the sum of four-day closing price rises//kloc-the average value of the sum of four-day closing price falls.
For example:
If the fluctuation of 14 in recent days is:
2 yuan rose on the first day, 2 yuan fell on the second day, and 3 yuan rose on the third to fifth day; On the sixth day, 4 yuan fell to 2 yuan on the seventh day and 5 yuan on the eighth day; It fell to 6 yuan on the ninth day and rose by 1 yuan on the tenth to twelfth day; 13- 14, fell by 3 yuan.
Then, the steps of calculating RSI are as follows:
(1) Add up the increase of 14 days and divide by 14. In the above example, the total * * * rise 16 yuan is divided by 14 to get 1. 143 (accurate to three decimal places);
(2) Add up the falling times of 14 days and divide by 14. In the above example, the total * * * falling 23 yuan is divided by 14 to get 1.643 (accurate to three decimal places);
(3) Calculate the relative intensity RS, that is, RS =1.143/1.643 = 0.696% (accurate to three decimal places);
(4) 1+RS = 1+0.696 = 1.696；
(5) Divide 1+RS by 100, that is,100/1.696 = 58.962;
(6) 100-58.962=4 1.038.
Results The intensity index of 14 days was 4 1.
The RSI values of different dates 14 days are of course different, connecting different points, that is, the trajectory of RSI.
Five different uses of RSI:
1) Vertex and bottom–30 and 70 are usually overbought and oversold signals.
2) Deviation-When market conditions hit a new high (new low) but RSI did not hit a new high, this usually indicates that the market will reverse.
3) Support level and resistance level-RSI can show support level and resistance level, and sometimes it can reflect support level and resistance level more clearly than the price chart.
4) Price trend patterns-Compared with the price chart, the price trend patterns such as double top and head-shoulder top are clearer on RSI.
5) U-turn-when the RSI breaks through (exceeding the previous high or low), it may mean that the price will suddenly change, just like other indicators. RSI needs to be used in conjunction with other indicators, and cannot generate a signal alone. The confirmation of price is the key to determine the entry price.
Judging the top by RSI deviation
Relative strength index (RSI) is one of the technical indicators. According to the strength index theory, any market price fluctuation is between 0- 100. According to the normal analysis, it is considered normal that the RSI value changes between 30 and 70. 80-90 thinks that the market is overbought, and the market price naturally faces downward adjustment. At 10-20, it is considered that the market has oversold, so the market price naturally faces stabilization and recovery. However, investors may find that sometimes the RSI is above 80 and the stock price is still rising, so it is not reliable to judge the top only by whether the stock price is overbought or not. So we should look for other laws to judge.
Generally speaking, technical indicators tend to deviate from the top, and RSI indicators are no exception. The top deviation of RSI indicator means that the stock price hit a new high in the upward trend, and then the RSI indicator also hit a new high above 80, and then the stock price fell to a certain extent, and RSI also followed the downward trend.
Now adjust. However, if the stock price rises again and exceeds the previous high point, the RSI will continue to rise with the stock price and will not exceed the previous high point, resulting in the top deviation of RSI. After the top deviation of RSI, it is more likely that the stock price will peak.
The reason why RSI's top deviation is a sign that the stock price peaks is mainly because when the dealer pulls up the shipment, in order to make a quick shipment, his pull-up action is bound to be rapid and violent, and the shipment action will last for a long time and space. This feature determines that the dealer has repeatedly raised the stock price. However, because the RSI index mainly reflects the strength of the market, this trend of no longer being strong will undoubtedly lead to the decline of RSI. Therefore, once the dealer's shipping trend appears, RSI usually falls back to a large extent, thus forming a top deviation trend. This phenomenon is also likely to appear in indicators such as KDJ, and the phenomenon that the volume deviates from the stock price is also one of the signs that the stock price peaks. As the price rises, the trading volume tends to decrease, indicating that the market trading activity is gradually weakening, and then the stock price is likely to face a downward trend.
After finding the deviation trend at the top of the indicator, investors should make a comprehensive judgment based on the market atmosphere and disk situation at that time. If the market is still in a relatively bullish stage, it is more likely that the stock price will continue to rise, but the magnitude and intensity will be significantly weaker than in the previous period. This is mainly because this rise is an upward trend stimulated by market sentiment, rather than a substantial promotion of trading volume, so the rise cannot last long.
Special analysis method of RSI
First, the shape of the RSI curve
When the RSI indicator is consolidating at a high level or sideways at a low level, it is also an analytical method to judge the market and decide the buying and selling actions.
1. When the RSI curve forms a high-level inversion form such as M-head or triple-top at a high level (above 50), it means that the upward kinetic energy of the stock price has been exhausted, and the stock price may have a long-term inversion. Investors should sell stocks in time. If the stock price trend curve has the same shape, it can be confirmed. The magnitude and process of the stock price decline can refer to the top reversal patterns such as M-head or triple top.
2. When the RSI curve is at a low level (below 50) and forms a low-level inversion pattern such as W bottom or triple bottom, it means that the downward momentum of the stock price is weakened, and the stock price may build a medium-and long-term bottom, so investors can open positions in batches on dips. If the stock price trend curve has the same shape, it can be confirmed. The rising range and process of stock price can be judged by referring to the bottom reversal pattern such as W bottom or triple bottom.
3. The top inversion shape of 3.RSI curve is more accurate than the bottom shape to judge the market.
Second, the deviation of RSI curve
The deviation of RSI indicator means that the trend of RSI indicator curve is just the opposite to that of K-line chart of stock price. The deviation of RSI indicators can be divided into top deviation and bottom deviation.
(1) top deviation
When RSI is at a high level, but it has recently reached a new high, there is a trend that one peak is lower than the other. At this point, the stock price on the K-line chart hit a new high, forming a trend that the peak is higher than the peak, which is the top deviation. Top deviation is generally a signal that the stock price is about to reverse at a high level, indicating that the stock price is about to fall in the short term, which is a selling signal.
In the actual trend, the top deviation of RSI indicator means that the stock price hit a high point in the rising process, and the RSI indicator also hit a new high above 80. After that, the stock price fell to a certain extent, and RSI was also adjusted with the downward trend of the stock price. However, if the stock price goes up again and exceeds the previous high point to hit a new high, and RSI also goes up with the stock price rise but begins to fall back without exceeding the previous high point, this forms the top deviation of RSI indicators. After the top deviation of RSI, it is more likely that the stock price will peak and fall back, which is a relatively strong selling signal.
(2) Bottom deviation
The bottom deviation of RSI generally appears in the low-level area below 20. When the stock price falls all the way on the K-line chart, it forms a wave-by-wave trend, and the RSI line takes the lead to stop falling and stabilize at a low level, forming a trend that the bottom is higher than the bottom, which is the bottom deviation. The bottom deviation generally indicates that the stock price may rebound in the short term, which is a signal of short-term buying.
For the deviation phenomena of indicators such as MACD and RSI, in the deviation of RSI, the top deviation is more accurate than the bottom deviation. When the stock price is at a high level and the RSI is above 80, it can be considered that the stock price is about to reverse downward and investors can sell the stock in time; When the stock price is at a low level and RSI is also at a low level, it is generally necessary to repeatedly deviate from the bottom several times to confirm that investors can only make strategic positions or short-term investments.
Third, the modification of parameters.
From the calculation method of RSI index, we can see that RSI index takes time as a parameter, and the time period that constitutes the parameter can be days, months or weeks, years, minutes and so on. In theory, these time periods can take any length of time according to the time of stock listing and the choice of investors. But in most stock market analysis software, most time periods are limited to 1-99, such as 65439.