Can You Provide a Succinct Definition of the RMI Forex Indicator?

The Relative Momentum Index (RMI) is a technical indicator used by traders to identify trend changes in the price of a security. It is calculated by taking the ratio of the current closing price to its n-period moving average and then comparing that ratio to its n-period exponential moving average. The RMI indicator is often used in conjunction with other indicators such as moving averages and oscillators, as it helps traders identify when momentum is increasing or decreasing.

The RMI indicator was developed by J. Welles Wilder Jr., and introduced in his 1978 book New Concepts in Technical Trading Systems. Wilder believed that markets tend to move in trends, and that momentum can be used to identify when those trends are beginning or ending. He also believed that markets tend to overshoot their true value, creating opportunities for traders who can correctly anticipate these moves.

To calculate the RMI, first calculate the relative strength index (RSI). This is done by subtracting the n-period exponential moving average from the current closing price and then dividing this number by its absolute value plus its n-period exponential moving average. The result will be a number between 0 and 100 which indicates how strong or weak momentum currently is for a given security.

Next, calculate the relative momentum index (RMI). This involves subtracting an n-period simple moving average from this RSI value and dividing it by its absolute value plus an n-period simple moving average of itself (the RSI). This calculation results in a number between -100 and +100 which indicates whether momentum is increasing or decreasing over time for a given security.

Traders typically use both values together when analyzing securities; if both values are positive then it suggests that there may be an uptrend forming while if both values are negative then it suggests there may be a downtrend forming. Conversely, if one value is positive while another one is negative then it suggests that there may be some sort of consolidation occurring within the market rather than any type of trend formation taking place at all times.

Traders also look at divergences between these two values; if one value starts increasing while another decreases then this could suggest an impending reversal in trend direction for whatever security they are analyzing.

In conclusion, the Relative Momentum Index (RMI) is a technical indicator used by traders to identify trend changes in prices. It combines two calculations – relative strength index (RSI) and relative momentum index (RMI) – which together help traders spot potential reversals before they occur. By combining these two indicators, traders can gain valuable insight into how markets may behave going forward, allowing them to make more informed decisions regarding their trading strategies.