This Excel spreadsheet downloads historical Forex data and plots the Relative Strength Index (RSI) and volatility of the currency-pair.
You can also inspect and verify the calculations used to generate the results.
Technical analysts often use RSI to analyze movements in stocks and foreign exchange markets. However, this oscillating indicator is simply a guide and can give false-positives.
Accordingly, RSI is always used with other technical indicators (like Exponential Moving Averages, or EMAs) so that traders can make better decisions
However, it is one of the more significant tools in the forex trader’s arsenal.
Typically, an RSI value
- below 30 implies that a currency pair is oversold,
- below 15 implies that a currency pair is strongly oversold
- above 70 implies that a currency pair is overbought
- above 85 implies that a currency pair is strongly oversold
A typical trading strategy for a currency-pair is to
- buy when the 14-day RSI dips below 30, bottoms out, and crosses 30 on an upward trajectory
- sell when the 14-day RSI is greater than 70, plateaus, and then falls below 70
A guide to calculating RSI is given here.
This spreadsheet is simple to use. All you have to do is enter
- two currencies, via their three-letter currency codes
- a start and end date
- the number of trading days in a year (typically around 250)
- a time window for the RSI calculation
- a time window for the volatility calculation
Once you’ve entered this date and clicked a button, some clever VBA fetches daily historical foreign exchange rates from the internet, and plots the Relative Strength Index and the historical volatility.
The screengrab illustrates typical RSI results for GBP/USD from 1 January 2011 to 8 February 2013. As you can see, most of the movement is between an RSI of 30 and 70. Occasionally, the RSI of GBP-USD dips below 30 or peaks over 70, but quickly pulls back to the normal trading range.
The RSI and volatility calculations are presented in a separate sheet called “Data” (you can click on the cells to view the formulas automatically generated by the VBA).
Click the picture below for example calculations.
The spreadsheet is completely free!