Understanding RSI Moving Averages

A moving average calculated using the RSI is a type of technical analysis tool that is used to smooth out the fluctuations in the RSI and make it easier to identify trends and trend reversals.

To calculate an RSI moving average, you first need to calculate the RSI using the formula I provided earlier:

Where RS is the ratio of the average gain of up periods to the average loss of down periods, over a specified number of periods. The default setting for the RSI is 14 periods, but you can use any number of periods you choose.

Once you have calculated the RSI, you can then apply a moving average to it to smooth out the fluctuations and make it easier to interpret. There are several different types of moving averages that can be used, including simple moving averages, exponential moving averages, and weighted moving averages.

To apply a moving average to the RSI, you simply need to take the average of the RSI values over a specified number of periods. For example, if you are using a 20-period moving average, you would take the average of the RSI values over the past 20 periods. This average value is then plotted on the chart along with the RSI and the price of the security.

One way to use an RSI moving average is to look for patterns between the RSI and the moving average. For example, if the RSI is trending higher and crosses above the moving average, it could be a sign of a potential uptrend. Similarly, if the RSI is trending lower and crosses below the moving average, it could be a sign of a potential downtrend.

In summary, an RSI moving average is a technical analysis tool that is used to smooth out the fluctuations in the RSI and make it easier to identify trends and trend reversals. By combining the RSI with a moving average, traders can create more comprehensive trading strategies and improve their ability to make informed trading decisions.