RSI (Relative Strength Index)
Also called: RSI, relative strength index, RSI 14.
Formula
Start with the average gain and average loss over 14 close-to-close changes. Each later average = prior average x 13/14 + latest gain or loss / 14. RSI = 100 / (1 + average loss / average gain). When only gains exist it is 100. When only losses exist it is 0. The desk uses 50 when both averages are zero.
How it is read
Fourteen changes need 15 reached closes. Until then there is no reading. A missing close starts a fresh warm-up, so the desk does not invent a change across a gap. Wilder smoothing keeps part of the older average, rather than recalculating a simple 14-change window each time. In a period-3 example, closes 100, 102, 101 and 103 have gains 2, 0 and 2 and losses 0, 1 and 0. The first RSI is 80. Changing the forming close can change the latest reading.
What it does not tell you
A high reading does not mean price has to fall next. A low reading does not mean it has to rise. A strong trend can keep RSI near one end of its scale for a long time. It describes the selected closes and interval, without order-book depth or fill costs. Index RSI is not an option-premium reading. The flat-series value of 50 is a stated desk convention. A different starting history or seed can change early values on another chart.
Related concepts
Watch candles on the practice desk
Open the NIFTY and BANKNIFTY practice desk. Compare the chart with the idea explained here.