Calculate RSI in Excel

To calculate the Relative Strength Index (RSI) in Excel, follow a systematic process to determine the average gains and losses over a 14-day period. The RSI formula, RSI = 100 – 100 / (1 + RS), where RS is the Relative Strength, forms the core of the calculation.

Step 1: Calculate Daily Price Changes

Start by listing the daily closing prices. Then, compute the daily price changes. Subtract the previous day's price from the current day's price to find the gain or loss for each day.

Step 2: Separate Gains and Losses

Separate the gains from the losses. Record positive values for gains and use zero for days with losses. Conversely, record the absolute value of losses and use zero for days with gains.

Step 3: Compute Averages

Calculate the average of the up moves and down moves over the last 14 days. Sum the gains and divide by 14 for the average gain. Similarly, sum the losses and divide by 14 for the average loss.

Step 4: Calculate Relative Strength (RS)

Divide the average gain by the average loss to get the RS value. This represents the momentum of the price movements.

Step 5: Compute RSI

Apply the RSI formula: RSI = 100 – 100 / (1 + RS). Convert the RS into the RSI value to gauge the momentum as an index between 0 and 100.

Step 6: Analyze RSI

Interpret the RSI value to make trading decisions. An RSI above 70 may indicate an overbought condition, while an RSI below 30 may suggest an oversold condition.

Common Use Cases

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  Use case 1: Analyzing stock price momentum to inform buying or selling decisions
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  Use case 2: Creating custom trading strategies based on technical analysis indicators
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  Use case 3: Monitoring the relative strength of different securities for portfolio diversification
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  Use case 4: Back-testing trading models that incorporate RSI as a signal
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  Use case 5: Identifying overbought or oversold conditions in the forex market

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