Harlan: The basics are right
However, just plugging in 7 closing prices and getting a number is almost futile, unfortunately. One needs to go back a few months (3 is best) and then start the process. Once you get the hang of it, it really doesn't take long. Otherwise, you get a number (87.5) and have no idea what that compares to. It so happens that day 1 of your data was the 2nd lowest RSI since the first RSI's i used on ~1/20. This will mess up your results. Yesterday my RSI was 70.9.
Eventually, if you do keep doing what you started, your number will equal the ones i have...but it will take some time to converge. In the meantime, you won't really know what to compare things to. Every stocks RSI's are different so taking 3 months of numbers seems the best way to see what a local high/low is, how much breathing room is in the RSI's (we can go to $13 very, very comfortably, statistically), and what patterns have developed to help give you a more educated guess about what degree it might move.
The 80/40 sell/buy is only a guide...it's a very broad guide and presently we really don't know the number to use for TLTK, except anything under RSI 49 seems to work welll for buying at the bottom. But then again, that's more useful for those in TLTK long and finding a place to interday trade on. Lots of other factors that charting RSI over 3 months can help clue you in on...can help give you a better feeling about what TLTK has done...and what it can do at any point in time...these factors aren't spelled out in a book, it just takes some work that you will be rewarded on in due time....especially when you are ready to eyeball another stock after TLTK's rise slows to a level that you are comfortable to go into something else.
Practice it on TLTK and learn from all the RSI numbers.... you'll be glad you did...
My 2 cents worth...but as an indicator, RSI seems to point very well about what to do on any specific day.... |
