Filters & Data
The RSI indicator is a technical indicator based on the stock price action and represents a trend and mean-revision. You can read more about it on it's Wikipedia page.
Why use it?
You can use the RSI to filter stocks according to their strength in trend or mean revision. If you increase your chances of predicting the stock direction, you will increase your profits. You don't need to be 100% correct, just raise your probability. It will increase your expectancy.
How to use the RSI indicator in SamurAI
You can use the RSI indicator to:
- Find stocks in oversold/overbought area (increase probability of reversal)
- Find stocks in positive/negative trends to trade with the trend.
- Add RSI and sort by RSI to rank the trade opportunities (Pro tip: You can also save the scan).
In Samurai, you can use it in an advanced way to find stocks that are about to move in your direction. You can choose:
- Zone - Make sure the indicator has specific values. For example: in overbought/oversold zones.
- Cross - The indicator crossed a value. For example: Entered the overbought area or left the oversold area.
- Breadth - How long does the indicator stay in the zone. This is useful for finding extreme cases and initiating trades after, for example, the stock has been a week in oversold territory.
- Length: in days. During the market hours, we will simulate the last price as the closing price for that day to show you how the RSI changes during market hours.
- From: and To: - These are the filters to initiate the zone you want the RSI to be. The most common zones are: Oversold (below 30) and overbought (above 70).
- Min Periods inside/outside range: How long the RSI is in or out the range specified above.
- You can replace the 'inside' and 'outside' the range filters by clicking the on the word.
- The number is in days - how many days you want the RSI to be inside or outside the zone.
- This is useful for:
- Cross: Set it as min periods outside to 1.
- Breadth: Set it as min period inside for 5, for example.
- See more common use cases below.
Common use cases
- RSI is in the overbought zone - (1) periods 14 (default), (2) from:70 to:100 (3) Min. periods in range: 0 (default)
- RSI Just crossed into oversold range: (1) periods 14 (default), (2) from:0 to:30 (3) Min. periods outside range: 1 (Was at least one day outside the range before entering the range of from 0 to 30)
- RSI crossed outside of oversold range after being a week in the oversold territory: (1) periods 14 (default), (2) from:30 to:100 (3) Min. periods outside range: 5 (five trading days = one calendar week)
- RSI is in overbought territory for two weeks: (1) periods 14 (default), (2) from:70 to:100 (3) Min. periods inside range: 10.
- Sell puts with high yield on good companies that are oversold with over 75% probability of profit - See scan.
Read about the backtests we did to help you use it - Blog
About Technical analysis Engine - KB
About Bollinger Bands - KB
About RSI - KB
About MA indicator - KB
About MA Crossover indicator - KB
About MA Rank (unique) indicator - KB
About MACD indicator - KB
About Stochastic Oscillator - KB
Note about calculation
The RSI formula requires the use of a moving average. Different sources use different ways to average the data; some use a simple average, some use an exponential average (gives more weight to the last values). Some use unique calculations such as Wilders (Thinkorswim is the most notable example). We use a simple moving average and saw that it is more important to use the indicator correctly (cross and breadth, for example) rather than tweak the formula.