The Relative Momentum Index function determines the internal momentum of a field using the number of upward and downward price changes across a given number of bars over a given period of time.
The Relative Momentum Index is based on a ratio of the average upward changes to the average downward changes over a given period of time. The individual changes are calculated for the given number of days. This is an extension of the Relative Strength Index, which uses a momentum period of 1 to calculate day-to-day changes.
The function has a range of 0 to 100 with values typically remaining between 30 and 70. Higher values indicate overbought conditions while lower values indicate oversold conditions.The Relative Momentum Index at the beginning of a data series is not defined until there are enough values to fill the momentum for the given period, or a number of bars equal to the sum of the periods.. In addition, the value is defined as 100 when no downward changes occur during the given period.
The Relative Momentum Index doesn’t count up and down days from close to close as the RSI does, but it counts up and down days from the close relative to a close n-days ago (where n is not limited to 1 as required by the RSI).
Like in case of all overbought/oversold indicators, the RMI shows similar positive and negative sides. When the markets are in strong trend, the RMI will stay at overbought or oversold levels for a long period. Otherwise the RMI conduces to predictably fluctuate between an overbought level of 70 to 90 and an oversold level of 10 to 30. While the RSI differs from the price, the price will ultimately improve in the course of the index.
the RMI is a variation of the RSI indicator. Instead of counting up and down days from close to close as the RSI does, the RMI counts up and down days from the close relative to the close x-days ago (where x is not necessarily 1 as required by the RSI). So as the name of the indicator reflects, “momentum” is substituted for “strength.”