The Relative Strength Index(RSI) does not compare the relative performance of one security to another. It essentially compares the price of the security to itself.
This Relative Strength Index is one of the most popular indicators. Developed by Welles Wilder, it was fist published in the June,1978 issue of the “Commodities” (now known as “Futures”) You can refer to his book "Technical Trading Systems" for more detailed information on this indicator.
You can use RSI to spot positive and negative divergences with price.
It may also be used to determine if a stock or index has reached an overbought or oversold condition. A reading of 70% or higher is generally an overbought position. Conversely, values near the 30% level should be considered an indication the situation has become oversold.
If used as an overbought/oversold indicator, it is important to first determine whether a definable trend exists. This is best determined by using another technical indicator such as price moving averages or trendlines. After the direction of a primary trend has been successfully identified, use Wilder's RSI to trade strictly with the trend.
Calculation:
If Price >Prev Price then
Ups= Price - PrevPrice, Downs=0
else
Downs=PrevPrice - Price, Ups=0
PrevPrice = The previous price
Inputs:
Price Field = Close
Indicates Open, High, Low or Closing price.
Period = 14
Indicates time period(the number of days for daily analysis, the number of weeks for weekly analysis, etc.).
Indicator Type: Momentum