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RSI: Relative Strength Index demystified

What is RSI? The relative strength index (RSI) is a momentum indicator developed by noted technical analyst Welles Wilder, that compares the magnitude of recent gains and losses over a specified time period to measure speed and change of price movements of a security. It is primarily used to attempt to identify overbought or oversold conditions in the trading of an asset.

RSI attempts to capture the following:
1. Recent gains and losses over a period of time,
2. Measure of speed and change of price movements, and
3. Overbought or oversold conditions in trading of a stock or Index.
Calculating RSI 1. Find out average gain during specified time frame. 2. Find out average loss during specified time frame.
Then calculate the RS value for each closing day. RS = Average gain of up periods during the specified time frame / Average loss of down periods during the specified time frame.
The relative strength index is calculated using the following formula:
RSI = 100 - 100 / (1 + RS)
The RSI pr…
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Elon Musk: Tesla, Spacex, and the Quest for a Fantastic Future by Ashlee Vance
My rating: 4 of 5 stars

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If you list all the countries in the world and their populations, 27% of the numbers will start with the digit 1. Only 3% of them will start with the digit 9. Something very similar holds if you look at the heights of the 60 tallest structures in the world — whether you measure in meters or in feet. 

This phenomenon — called Benford's Law —helps auditors detect fraud in things like taxes and elections, but it also connects up in striking ways to modern physics and mathematics (e.g., power laws in statistical distributions, as well as ergodic theory).

Benford's Law often strikes people as unintuitive because it seems that every digit should have an equal opportunity to start country populations or heights of skyscrapers, like this:

(The delightful figures are from

This egalitarian intuition about leading digits turns out to be misleading. The situation where every digit is equally likely to start numbers is actually the anomalous one. 


The fact…

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