Registered User Joined: 6/30/2017 Posts: 1,227
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Happy Monday Bruce,
It's a sunny Sunday morning in the greatist city in the world, the coffee pot is brewing, and I cracked open Connors' latest ...
Before I dive too deep, I wanted to revisit a topic we visited a few years ago. Can't recall the difference in TC2000 between RSI and Wilder's RSI. Before I automate Connors' setups (you can buy them for $250 for AmiBroker, lol) I want to make sure I'm using the same RSI Larry is.
Below is an excerpt from Connors' ...
Excerpt from An Introduction to ConnorsRSI from Connors Research, LLC, 2012.
... let’s review Wilder’s RSI. RSI is a very useful and popular momentum oscillator that compares the magnitude of a stock’s gains to the magnitude of its losses over some lookback period. Wilder himself believed that 14 periods was the ideal lookback. We often use the shorthand notation RSI(14) for the 14-period RSI.
The formula below computes RSI(14) for a series of price changes:
If we wanted to compute RSI for a different number of periods (N), then we would replace 14 in the formula above with N, and replace 13 with N-1. Regardless of the number of periods used in the calculation, the result will always be a number between 0 and 100. Traders who use RSI(14) typically
look for values greater than 70 to identify overbought conditions, and values less than 30 to indicate oversold conditions.
Our previous research has shown that using shorter look-back periods makes RSI more effective in predicting short-term price movements. We have published many strategies that utilize RSI(2), as well as several that use RSI(3) and RSI(4). Changing the number of periods also has an effect on the RSI levels that best identify overbought and oversold conditions.
For example, an RSI(2) value of less than 10 is usually a reliable indicator of an oversold condition, while an RSI(2) value over 90 is a good benchmark for an overbought condition.
So, ... do I go with RSI, or Wilder's RSI?
Thanks, Bruce!
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Worden Trainer
Joined: 10/7/2004 Posts: 65,138
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You want Wilder's RSI. The smoothing used for the internal calculations described are for Wilder's smoothing.
The plain RSI uses either sums or simple moving averages for the calculations instead.
-Bruce Personal Criteria Formulas TC2000 Support Articles
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Registered User Joined: 6/30/2017 Posts: 1,227
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Awesome. Good to know. Thanks, Bruce!
Again, I figured but didn't want to assume.
Burns me every time.
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Worden Trainer
Joined: 10/7/2004 Posts: 65,138
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You're welcome.
-Bruce Personal Criteria Formulas TC2000 Support Articles
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