RSI is a leading momentum indicator. The RSI is a ratio of the recent upward price movement to the absolute price movement. The RSI is always between 0 and 100. It can be interpreted to indicate an overbought condition when the value is above 70 and an oversold condition when the value is below 30. The RSI indicates a reversal when the prices are making new highs or new lows.
The formula for computing the RSI is not straightforward and is hence not mentioned here. If you are interested in the underlying math, please refer to the official documentation of TA-Lib on RSI at http://www.tadoc.org/indicator/RSI.htm. Although it is a good idea to know the mathematics of how this works, this recipe does not require you to understand or remember the given formula. We use a third-party Python package, talib, which provides a ready function for calculating the RSI.
Getting started
Make sure your Python namespace has the following objects:
- talib...