1. Index Definition: The Relative Strength Index (RSI) measures the magnitude of price increases and decreases over a specific period. It is used as a method to judge the strength of unilateral stock price movements and serves as an indicator for determining buying and selling points in the stock market.

• RSI Range: 0–100

• Calculation Formula:

  $RSI=100-\frac{100}{1+RS}$

  $RS (Relative Strength) = \frac{AvgGain}{AvgLoss}$

• Default Parameters: A 14-day period is commonly used, though it can be adjusted based on trading styles (e.g., 7 days for short-term, 21 days for long-term).

  $RSI=100*\frac{up}{up+down}$

• RSI $\approx$ 0 (up <<< down): This indicates that downward momentum has been much stronger than upward momentum in the recent period. However, if the value is extremely low (typically < 30), it may indicate the price is "oversold". When RSI is less than 20, an oversold signal occurs, suggesting selling pressure is excessive and likely to normalize. Investors may consider going long at this point, selling once the price rises in the future.

• RSI $\approx$ 100 (up >>> down): This indicates upward momentum is much stronger than downward momentum, showing an extremely optimistic/bullish state. If the value is too high (typically > 70), it may indicate the price is "overbought". When RSI is greater than 80, an overbought signal occurs, suggesting buying pressure is excessive and may decrease. Investors may consider selling now and buying back after a price drop to profit from the spread.

• RSI = 50 (up = down): Defined as the "centerline," indicating that buying and selling forces are equal.

2. Positive and Negative Emotion Ratio Indicators:

$positive\_emotion\_ratio_{t}=\frac{N_{positive,t}}{N_{total,t}}$

$negative\_emotion\_ratio_{t}=\frac{N_{negative,t}}{N_{total,t}}$

• $N_{positive,t}$: Number of positive sentiment texts at time $t$.

• $N_{negative,t}$: Number of negative sentiment texts at time $t$.

Daily emotion_ratio change ($\Delta ER_{t}$):

$\Delta ER_{t}=ER_{t}-ER_{t-1}$

Classification:

• Gain ($gain_{i}$): If $\Delta ER_{t} > 0$, it equals $\Delta ER_{t}$; otherwise, it is 0.

Calculate Average Gain and Average Loss (14 days):

$AvgGain_{t}=\frac{1}{14}\sum_{i=1}^{14}gain_{i} , AvgLoss_{t}=\frac{1}{14}\sum_{i=1}^{14}loss_{i}$

Relative Strength (RS):

$RS_{t}=\frac{AvgGain_{t}}{AvgLoss_{t}}$

Final RSI Value:

$RSI_{t}=100-\frac{100}{1+RS_{t}}$

1. Trading Recommendations Table:

2. RSI "Golden Cross" and "Death Cross": The time span $N$ is a critical factor for RSI. A larger $N$ (long-term RSI) provides a stronger sense of trend with smaller fluctuations, acting as a slow line. A smaller $N$ (short-term RSI) is more sensitive to price changes with larger fluctuations, acting as a fast line.

• 2.1 Golden Cross: When the short-term RSI line crosses above the long-term RSI line, it indicates a bullish market. This suggests strong recent buying pressure and upward momentum, releasing a strong buy signal.

• 2.2 Death Cross: When the short-term RSI line breaks below the long-term RSI line, it indicates a bearish market. This suggests strong recent selling pressure and downward momentum, releasing a strong sell signal.

3. RSI Divergence - M-Shape vs. W-Shape: RSI is a momentum indicator; if the price hits a new high/low but the RSI does not follow, it implies "price distortion". M/W shapes are momentum turning points before a reversal.

• 3.1 M-Shape (Bearish Divergence):

  • Price hits a new high, but RSI fails to reach a new high.

  • RSI trend: Forms an M-shape structure.

  • Signal: Predicts a top; price is near a peak and may stop rising and start falling due to overheating or weakening buy momentum.

  • Example: A stock rises from 80 to 100, but RSI exceeds 70 and shows divergence; this suggests it "can't go higher," and investors should consider profit-taking or reducing positions.

    

• 3.2 W-Shape (Bullish Divergence):

  • Price hits a new low, but RSI fails to hit a new low.

  • RSI trend: Forms a W-shape structure (the second bottom is higher than the first).

  • Signal: Predicts a bottom; price is near a low and may stop falling and start rebounding as selling pressure weakens.

1. Index Definition: The Relative Strength Index (RSI) measures the magnitude of price increases and decreases over a specific period. It is used as a method to judge the strength of unilateral stock price movements and serves as an indicator for determining buying and selling points in the stock market.

• RSI Range: 0–100

• Calculation Formula:

  $RSI=100-\frac{100}{1+RS}$

  $RS (Relative Strength) = \frac{AvgGain}{AvgLoss}$

• Default Parameters: A 14-day period is commonly used, though it can be adjusted based on trading styles (e.g., 7 days for short-term, 21 days for long-term).

  $RSI=100*\frac{up}{up+down}$

• RSI $\approx$ 0 (up <<< down): This indicates that downward momentum has been much stronger than upward momentum in the recent period. However, if the value is extremely low (typically < 30), it may indicate the price is "oversold". When RSI is less than 20, an oversold signal occurs, suggesting selling pressure is excessive and likely to normalize. Investors may consider going long at this point, selling once the price rises in the future.

• RSI $\approx$ 100 (up >>> down): This indicates upward momentum is much stronger than downward momentum, showing an extremely optimistic/bullish state. If the value is too high (typically > 70), it may indicate the price is "overbought". When RSI is greater than 80, an overbought signal occurs, suggesting buying pressure is excessive and may decrease. Investors may consider selling now and buying back after a price drop to profit from the spread.

• RSI = 50 (up = down): Defined as the "centerline," indicating that buying and selling forces are equal.

2. Positive and Negative Emotion Ratio Indicators:

$positive\_emotion\_ratio_{t}=\frac{N_{positive,t}}{N_{total,t}}$

$negative\_emotion\_ratio_{t}=\frac{N_{negative,t}}{N_{total,t}}$

• $N_{positive,t}$: Number of positive sentiment texts at time $t$.

• $N_{negative,t}$: Number of negative sentiment texts at time $t$.

Daily emotion_ratio change ($\Delta ER_{t}$):

$\Delta ER_{t}=ER_{t}-ER_{t-1}$

Classification:

• Gain ($gain_{i}$): If $\Delta ER_{t} > 0$, it equals $\Delta ER_{t}$; otherwise, it is 0.

Calculate Average Gain and Average Loss (14 days):

$AvgGain_{t}=\frac{1}{14}\sum_{i=1}^{14}gain_{i} , AvgLoss_{t}=\frac{1}{14}\sum_{i=1}^{14}loss_{i}$

Relative Strength (RS):

$RS_{t}=\frac{AvgGain_{t}}{AvgLoss_{t}}$

Final RSI Value:

$RSI_{t}=100-\frac{100}{1+RS_{t}}$

1. Trading Recommendations Table:

2. RSI "Golden Cross" and "Death Cross": The time span $N$ is a critical factor for RSI. A larger $N$ (long-term RSI) provides a stronger sense of trend with smaller fluctuations, acting as a slow line. A smaller $N$ (short-term RSI) is more sensitive to price changes with larger fluctuations, acting as a fast line.

• 2.1 Golden Cross: When the short-term RSI line crosses above the long-term RSI line, it indicates a bullish market. This suggests strong recent buying pressure and upward momentum, releasing a strong buy signal.

• 2.2 Death Cross: When the short-term RSI line breaks below the long-term RSI line, it indicates a bearish market. This suggests strong recent selling pressure and downward momentum, releasing a strong sell signal.

3. RSI Divergence - M-Shape vs. W-Shape: RSI is a momentum indicator; if the price hits a new high/low but the RSI does not follow, it implies "price distortion". M/W shapes are momentum turning points before a reversal.

• 3.1 M-Shape (Bearish Divergence):

  • Price hits a new high, but RSI fails to reach a new high.

  • RSI trend: Forms an M-shape structure.

  • Signal: Predicts a top; price is near a peak and may stop rising and start falling due to overheating or weakening buy momentum.

  • Example: A stock rises from 80 to 100, but RSI exceeds 70 and shows divergence; this suggests it "can't go higher," and investors should consider profit-taking or reducing positions.

    

• 3.2 W-Shape (Bullish Divergence):

  • Price hits a new low, but RSI fails to hit a new low.

  • RSI trend: Forms a W-shape structure (the second bottom is higher than the first).

  • Signal: Predicts a bottom; price is near a low and may stop falling and start rebounding as selling pressure weakens.