The Relative Strength Index is a technical oscillator created by J. Welles Wilder in his 1978 book, New Concepts in Technical Trading Systems. It ranges from 0 to 100, with values below 30 typically considered oversold and above 70 overbought.

Quantacula Code

RSI myRSI14 = new RSI(bars.Close, 14);
RSI myRSI20 = RSI.Series(bars.Close, 20);

Parameters

• source (TimeSeries)
• period (int)

Calculation

For each trading period, an upward change (U) or downward change (D) is calculated. Up periods are characterized by the close being higher than the previous close:

U = closing price - previous closing price 
D = 0

The down period is characterized by the close being lower than the previous period's close (note that D is nonetheless a positive number):

U = 0
D = previous closing price - closing price 

If the last close is the same as the previous, both U and D are zero. The average U and D are calculated using an n-period exponentially smoothed Moving Average with a = 1 / period. The ratio of these averages is the relative strength or relative strength factor:

RS = SMMA(U, period) / SMMA(D, period)

The relative strength factor is then converted to a relative strength index between 0 and 100:

RSI = 100 - (100 / (1 + RS))

Interpretation

• RSI below 30 is typically considered an oversold condition.
• RSI above 70 is typically considered an overbought condition
• A Bearish Divergence occurs when prices make a new high, but RSI makes a lower high
• A Bullish Divergence occurs when prices make a lower low, but RSI makes a higher low