The Mansfield Relative Strength Indicator (RSI) is a momentum oscillator that measures the speed and change of price movements. However, it’s important not to confuse this with the more popular Relative Strength Index, also abbreviated as RSI. Both indicators serve to measure the momentum of price movements, but they do so in different ways and have different underlying concepts.
The Mansfield RSI is named after Stan Weinstein‘s associate, Richard Mansfield. It is used to compare the performance of an individual stock to a benchmark index over a specified period.
Calculation & Formula
The Mansfield RSI is calculated by taking a ratio of the performance of a stock to a benchmark. If the stock is outperforming the benchmark, the value will be positive. Conversely, if it is underperforming, the value will be negative.
Determine the Stock’s Rate of Change (ROC):
Determine the Benchmark’s Rate of Change (ROC):
Calculate the Mansfield RSI:
Mansfield RSI=Stock ROC−Benchmark ROC
Here, ‘N’ usually represents a period of 250 trading days, which equates to about a year.
How is the Mansfield RSI Best Used
- Comparison to a Benchmark: The Mansfield RSI can be used to gauge how a particular stock or security is performing compared to a benchmark. If the Mansfield RSI is positive, the stock is outperforming the benchmark. If it’s negative, the stock is underperforming.
- Overbought and Oversold Levels: Similar to other momentum oscillators, when the Mansfield RSI reaches extreme values, it can be indicative of overbought or oversold conditions. Though the Mansfield RSI does not have fixed thresholds (like the traditional RSI’s 70 or 30 values), traders may use historical highs and lows for the specific security to identify these extreme levels.
- Trend Strength: The Mansfield RSI can be used to gauge the strength of a trend. For instance, if a stock is in an upward trend and its Mansfield RSI is steadily positive, this could indicate a strong upward momentum.
- Divergence: If a stock is making new highs, but the Mansfield RSI is not, this might indicate a potential reversal or slowing of the trend, as the stock might not be outperforming the benchmark as strongly as before.
It’s important to always use the Mansfield RSI in conjunction with other technical indicators and chart patterns for a more holistic approach to trading and analysis.