Relative Strength Index Indicators creations in Power BI with R script data transformation



RSI or Relative Strength Index developed by J. Welles Wilder Jr. in 1978 is a popular tool used in technical analysis to gauge momentum and identify potential overbought or oversold conditions in a stock's price movement. It is a “momentum indicator” that averages price gains and losses during a specific trading period, It helps determine whether a stock is more likely to continue its current trend or change direction. It considers daily stock gains and losses, providing a value between 0 and 100, with the equilibrium level at 50.

The Interpretation of RSI Levels:  
- Overbought (RSI > 70): Indicates that the stock is overbought, and the upward trend may reverse soon. Selling could be prudent.

- Oversold (RSI < 30): Suggests that the stock is oversold, and the downward trend may reverse. Buying opportunities may arise.

There are  different types of RSI based on its moving average calculations. Here I summarize four typic types of RSI in shortlist as following:

 WilderMA RSI: The default RSI calculation (Wilder's moving average) Offers a balance between responsiveness to recent price changes and smoothing out noise for a more stable RSI.

 SMA RSI: The smoothed RSI, based on the Simple Moving Average (SMA), smooths price data evenly over a specified period, can be less responsive to recent changes compared to WilderMA RSI, and potentially leading to slower identification of trends.

 EMA RSI: Combining RSI with the Exponential Moving Average (EMA) places more weight on recent prices. making it more reactive to market movements but potentially more prone to false signals.

WMA RSI: Weighted Moving Average (WMA) - based RSI allows customization of weight distribution assigns weights to past prices with more emphasis on recent ones, offering a level of responsiveness between Wilder RSI and EMA RSI.

We may use R script package TTR to calculate the 4 types RSI and plots them in Power BI via line and stack column visual. The attached YouTube video made by me shared a way on how to make the creations happend.



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