A Python project to calculate and understand the mathematics behind popular technical trading indicator used in crypto
-Relatives Strength Index (RSI)
The RSI is calculated using following formula: RSI = 100 -(100 / (1 + RS)) Where:
- RS = Average Gain / Average Loss over specified period (default 14 days)
- RSI looks at the last 14 candles/bars of whatever chart you're on
- Daily chart = last 14 days
- 1-hour chart = last 14 hours
- 5-minute chart = last 14 five-minute
- Above 50: buyers have the edge
- Around/above 70: overbought (price ran up a lot recently)
- Around/below 30: oversold (prices fell a lot recently)
- RSI is not a magic tool. It shows past moves, not the future.
- It gives many false signals in choppy markets and during news spikes.
- RSI alone won’t make crypto trading easy. In strong trends, it stays overbought/oversold and gives fake signals. Use it with trend and support/resistance, and always use a stop and small position. Backtest first, and avoid high leverage. (Not financial advice)