The Encyclopedia of the Indicator RSI (Relative Strength Index)

Investors and traders use technical analysis to study price behaviour and estimate upcoming price movements of different financial instruments. This type of analysis is generally applied across all segments of the financial market, and is preferred by traders and investors who deal in the futures market and Forex. Technical analysis employs a wide variety of tools, including moving average and trend lining as well as more complex techniques (e.g., Elliott wave principle; Gann trading methods). The relative strength index (RSI) is one of the most popular technical analysis tools today, used by many investors and traders on a daily basis.

There is a great deal of literature about the RSI; however, most authors focus primarily on the graphic analysis of the RSI signals, on levels of support/resistance and on divergence with the base price. The Encyclopedia of the Indicator RSI (Relative Strength Index) takes a different approach, and instead analyses the relationship between the RSI values and the price movement of the underlying asset. In essence, the book examines the RSI overbought/oversold indicators and the price of the asset, and then analyses the relationship between RSI and the asset price changes within a time interval. When the RSI leaves the overbought/oversold area, the underlying asset price change may move counter to the dominant trend originally behind the initial growth or decline of the RSI.

The book describes financial instruments by category and type: commodity futures, metals futures, agricultural futures, Forex, shares index, and spreads and futures for bonds and shares. With the underlying assumption that the price behaviour of different financial instruments varies, the book aims to test the relationship between the price change and the RSI indicator for each financial instrument.

The book is well organised and consists of nine sections. The first section provides a brief description of the RSI indicator and RSI analysis; at the same time, the author discusses the key principles of using the RSI. This level of detail is exacting, and reflects the author's practical experience with the RSI. The book also includes a significant amount of statistical data, charts and graphs. The author's research on each financial instrument is accompanied by concise, user‐friendly tables.

Sections two through nine are dedicated to individual financial instruments. Each section provides a description of the specific financial instrument as well as the structure of using the RSI indicator for each category of financial instrument. This approach allows the reader to better understand and interpret the presented data. The section on futures spread deserves special mention, as the existing literature on futures spread tends not to utilise the RSI indicator to estimate spread price movements. The author suggests a new method of analysing the RSI, which may be used for underlying assets of any type, including using a large sample size, should this amount of data be required by potential investors. In addition, the book contains the most recent data with respect to financial markets.

Despite the technical nature of the subject matter, the book is fairly easy to navigate. The author demonstrates a superb grasp of financial instruments and is successful in presenting the materials in a clear and concise manner. This book will be of considerable interest to traders, investors, and anyone who wishes to study the RSI in more detail.