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RSI indicator in Excel

Relative Strength Index (RSI) Indicator and RSI in Excel

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What is the RSI Indicator?

The Relative Strength Index (RSI) is a popular momentum oscillator used in technical analysis to measure the speed and change of price movements. Developed by J. Welles Wilder Jr., RSI helps traders identify overbought and oversold conditions in the market.

Key Features of RSI:

  • RSI values range from 0 to 100.
  • Above 70 – The asset is considered overbought, indicating a potential price reversal or pullback.
  • Below 30 – The asset is considered oversold, suggesting a possible upward reversal.
  • A midline of 50 is often used as a trend confirmation level.

Formula for RSI Calculation:

RSI is calculated using the following formula:RSI=100−(1001+RS)RSI = 100 – \left( \frac{100}{1 + RS} \right)RSI=100−(1+RS100​)

Where:

  • RS (Relative Strength) = (Average Gain over N periods) ÷ (Average Loss over N periods)
  • N is typically 14 periods by default.

How to Calculate RSI in Excel

Steps to Calculate RSI in Excel:

  1. Enter Closing Prices
    • In column A, list the dates.
    • In column B, list the closing prices of the asset.
  2. Calculate Daily Price Change
    • In column C, calculate the daily change:CopyEdit= B2 - B1
    • Copy this formula down the column.
  3. Separate Gains and Losses
    • In column D, calculate gains:CopyEdit= IF(C2>0, C2, 0)
    • In column E, calculate losses:sqlCopyEdit= IF(C2<0, ABS(C2), 0)
  4. Calculate the Average Gain and Average Loss
    • In column F, use the following formula for the first 14 periods:objectivecCopyEdit= AVERAGE(D2:D15)
    • In column G, calculate the average loss:objectivecCopyEdit= AVERAGE(E2:E15)
  5. Compute the Relative Strength (RS)
    • In column H, calculate RS:CopyEdit= F16 / G16
  6. Calculate RSI
    • In column I, apply the RSI formula:CopyEdit= 100 - (100 / (1 + H16))
    • Drag the formula down for all rows.

How to Use RSI in Trading

  • Overbought (RSI > 70): Look for potential sell signals.
  • Oversold (RSI < 30): Look for possible buy signals.
  • RSI Divergence: If the price makes a new high but RSI does not, it may signal a reversal.
  • RSI Trendlines: RSI crossing above 50 may confirm an uptrend, while crossing below 50 may confirm a downtrend.

By using RSI in Excel, traders can analyze historical data, identify trends, and make informed trading decisions based on momentum signals.