Need help w/ a math calcution re: RSI.........

Just out of curiousity, why are you wanting to know how to calculate it? Is this for a math course or somthing?

RSI is merely a reflection of past trading action on a stock and is interesting to observe but the real application of it is severely limited because the equation is merely if the stock closed higher or lower versus knowing the money flow and any reasoning behind the stock going up or down (meaning the markets decline or rise vs the actual stock itself).

I watch RSI but I dont trade off it exclusively by any means.

 

.........no , it's not for classroom application, I use it in tandem w/ daily moves in the cash market to short the S&P index during bear markets. Considering we are probably on the verge of the greatest bear in history , I wanted to know HOW it is derived . I know how I use it , but am looking to see if , by finding out how it is actually calculated,  it can be useful in predicitng RSI tops/bottoms ahead of the market, as opposed to behind it.

The problem with what you are wanting is RSI reflects what the market is doing and DID, so you cannot properly forecast where RSI is going due to the fact it can and will change based on the market itself.

Here is an example..

RSI on the SPX is at 50 right now. If you overlay the SPX with the RSI you will see very similar results, outside small differences, if the market is going lower, so is the SPX and when the market goes up, so does RSI.

Here is a good explanation for you-

LINK

Read through the whole thing..all RSI is basically is a function of averaging the market going up and down over a 14 day period, because that SMOOTHS out the calculation and makes it more reliable versus a shorter time frame.

In my view RSI cannot be traded off, nor can it be forecasted. I have seen RSI stay below 30 and above 90 for EXTENDED periods of time..enough that you would be screwed trying to trade off it, I have also seen the RSI whipsaw back and forth and back and forth right near the extreme points.

I once discussed another theory concerning moneyflow and divergence that calculated REAL moneyflow, and you can buy such a service..THAT has value.

Using technical indicators which really only are a function of what the market has DONE, are just nice tools..nothing more and on their own are not sufficient enough to trade off, unless you are using ultra tight stops and have like 10 indicators to use.