What is RSI?
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of price movements. Developed by J. Welles Wilder Jr. in 1978, it oscillates between 0 and 100 and is one of the most popular technical indicators used by traders.
RSI Formula
RS (Relative Strength) = Average Gain / Average Loss over the specified period (typically 14)
70 - 100
Asset may be overvalued. Potential reversal or pullback ahead.
30 - 70
No strong signal. Market is in balance.
0 - 30
Asset may be undervalued. Potential bounce or reversal ahead.
Interactive RSI Simulator
Watch how RSI reacts to price changes in real-time. Start the simulation or manually adjust the RSI value.
RSI is in neutral territory. Wait for clearer signals before making trading decisions.
How to Use RSI in Trading
Overbought/Oversold Strategy
Buy when RSI drops below 30 (oversold) and starts to rise. Sell when RSI rises above 70 (overbought) and starts to fall. Always wait for confirmation.
RSI Divergence
Bullish divergence: Price makes lower lows while RSI makes higher lows. Bearish divergence: Price makes higher highs while RSI makes lower highs. Divergences often signal trend reversals.
RSI Trend Lines
Draw trend lines on the RSI chart itself. RSI trend line breaks often precede price trend line breaks, giving you early signals.
RSI Settings for Different Timeframes
| Period | Best For | Sensitivity |
|---|---|---|
| 7 | Scalping & Day Trading | High |
| 14 (Default) | Day & Swing Trading | Medium |
| 21 | Position Trading | Low |
Common RSI Mistakes to Avoid
Never rely solely on RSI. Always combine it with price action, support/resistance, and other indicators for confirmation.
In strong trends, RSI can stay overbought or oversold for extended periods. Don't fight the trend.
Using the same RSI settings for all timeframes and markets. Adjust settings based on your trading style.
Use RSI on multiple timeframes. If daily and 4H RSI both show oversold conditions, the signal is stronger.
Best Exchanges with RSI Charts
These exchanges offer built-in RSI indicators and advanced charting tools.
Advanced RSI Analysis on TradingView
TradingView offers the most powerful RSI tools including customizable settings, alerts, and multi-timeframe analysis.
Try TradingView FreeKey Takeaways
- RSI measures momentum and helps identify overbought (>70) and oversold (<30) conditions
- RSI divergences are powerful signals for potential trend reversals
- Always combine RSI with other indicators and price action for confirmation
- Adjust RSI settings based on your trading style and timeframe
Ready to Trade with RSI?
Open an account on a top exchange and start applying RSI strategies today.