RSI (Relative Strength Index)

An indicator that compares recent up moves with recent down moves and shows, as a number from 0 to 100, which side has been stronger lately.

Weapon tier: Advanced
Slots used: Sub-charts 1/2
Created by: J. Welles Wilder Jr. · 1978

Concept

RSI compares how much the close rose and how much it fell over the last 14 candles and expresses the result as a value from 0 to 100. The bigger the up moves, the closer it gets to 100; the bigger the down moves, the closer to 0.

The panel shows the rsi line and its average, the rsiSignal line, with dotted lines at 30 and 70. Above 70 is often called “overbought” and below 30 “oversold”. These words only mean “it has risen a lot” or “it has fallen a lot”, not “it is about to turn”.

rsi
rsiSignal

Charts by TradingView Lightweight Charts™

Throughout the shaded stretch rsi was below 30, yet the price kept falling. If you had bought because “it is below 30”, you would have had to sit through a long further drop. This chart shows a rise after rsi came back above 30, but falling again afterwards is common too. Drag the chart sideways with a finger or the mouse to move it, and pinch with two fingers to zoom in. With a keyboard, click the chart, then use ←/→ to move and +/− to zoom.

How it is calculated

For each candle, note how much the close rose from the previous candle (the up move) and how much it fell (the down move) separately. A rising candle has a down move of 0, and a falling candle has an up move of 0.

Average the up moves and the down moves over 14 candles each. Every new candle blends into the previous average with a weight of 1/14 (Wilder’s average), so old values fade out only very slowly.

RSI = 100 − 100 ÷ (1 + average up ÷ average down). With almost no down moves it approaches 100; with almost no up moves it approaches 0.

rsiSignal is the simple average of rsi over the last 9 candles. It follows rsi more slowly.

Parameters

What it sets	Name in the game	Default	Range
Candles used to average the up and down moves	period	14	2 – 100

Trading ideas

Leaving oversold: when rsi drops below 30 and then climbs back above 30, it is commonly read as a sign that the selling pressure has eased. You watch the moment it “comes out”, not the moment it “goes in”, because the price can keep falling for a long time after going in. The chart on this page shows that scene.

Overbought works the other way: when rsi falls from above 70 back below 70, the buying pressure is seen as fading.

When rsi rises above rsiSignal, it is read together as a sign that recent strength is above its average.

Common traps

In a strong uptrend rsi stays above 70 for a long time. Selling just because “it is above 70” misses most of the move. The same goes for staying below 30 in a downtrend.
30 and 70 are only conventions. Depending on the stock and the period, rsi may never fall to 30, or it may stay below 30 for a long time.
The chart on this page was chosen as a scene where the price rose after the signal. Falling again after the same signal is common too, so read it together with the trend (lesson 2) and volume.

In the game

“RSI” is a “Advanced” weapon and uses 1 of the “Sub-charts” panels (limit 2). Volume in the starting setup already uses 1, so adding RSI brings it to 2 (0 left).
The panel shows the rsi and rsiSignal lines and dotted lines at 30 and 70.

Related indicators and lessons

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TRIX — An indicator that shows by what percent, per candle, a very smooth line — an exponential moving average stacked three times — rises or falls.
CCI — An indicator that shows how many times its usual swing the price has moved away from its recent average.
ROC — An indicator that connects into a line how many percent the close has risen or fallen compared with the close a few candles ago.
Disparity Index — An indicator that shows, around a baseline of 100, how many percent the close is away from its moving average.
Psychological Line — An indicator that reads the market mood, upbeat or gloomy, from the percentage of recent candles that closed higher.
Williams %R — An indicator that shows, as a number from −100 to 0, how far today’s close sits below the highest price of recent candles.
AB Ratio — An indicator that compares how far each candle rose above and fell below its open, showing which side was stronger during the session.
Ultimate Oscillator — An indicator that blends buying pressure over a short, a medium and a long period into a number from 0 to 100.
2. Trends and sideways moves
1. Reading a single candle