Over the years numerous technical indicators
have been developed to describe the stock performance, or, hopefully to predict
future price movements. In this section we introduce five of the most useful
indicators, provide examples, and explain how they are calculated.
Figure 6. RSI
RSI stands for Relative Strength Indicator. In order
to compute the p-period RSI, one first computes the p one-period
Then one computes the average of the up changes U and down changes D:
RSI = 100% x U/(U+D)
We can see that, if the price goes up in every single period,
RSI is 100%. If the price goes down in every period, RSI=0.