Now that we have calculated the change up and down values of the last n candles, we will need to calculate the simple or modified moving average (SMMA) of the up changes and down changes. This will be important for our next step. When calculating the RSI of a given candle, we will need to calculate the change up and change down values for each of the last n candles. On the other hand, if the opening price was $10 and the closing price was $13, then: For example, if your favorite stock opened with the price of $10 and closed with the price of $8, then for this day: The aim of this calculation is to find out how much upward or downward force happened on each day. For this, we will use the following formulas. Now that we have decided the length and time frame, we will need to calculate the up changes and downward changes that occurred in the last 14 days. For example, if we use a 14 day RSI, then it means that today’s RSI value is based on the changes that occurred in the last 14 days. ![]() ![]() The length will decide how far back in the past do look in order to calculate the RSI value of the current candle. The second thing to decide is the length of the RSI (designated in the formula as n). However, a daily timeframe (day candle sticks) is a popular time frame so we will go with that for our example. This usually depends on each individual trader. The first step we need to take is to decide which time frame and length do we use when calculating the RSI. So let us start by displaying the general formula for calculating the RSI and then we will we will break down this formula into components and calculate each of the components. The good news is that these components are simple to calculate individually.
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