What is RSI?
The Relative Strength Index compares the size of recent up moves with the size of recent down moves and scales the result onto 0 to 100. A reading near 100 means gains have dominated the window, a reading near 0 means losses have. Altrady Charts draws it in its own pane with dashed lines at 70 and 30, the conventional overbought and oversold levels.
RSI measures the balance of recent gains and losses. It does not measure trend direction on its own, and a high or low reading does not mean price is about to turn.
How to use RSI
- Above 70 or below 30. By convention, above 70 is read as overbought and below 30 as oversold. In a strong trend RSI can stay beyond either level for a long time, so these are zones of attention rather than reversal signals.
- The 50 line. Above 50, average gains over the window are larger than average losses; below 50 the reverse. Some traders use this as a simple momentum filter.
- Divergence. When price makes a new high but RSI makes a lower high, the move is being made on smaller gains. That can precede a pause or reversal, and it can also persist for many bars.
- Period length. A shorter length swings to the extremes more often; a longer length is calmer and reaches 70 or 30 less often.
These are ways to read the line, not entry signals on their own.
Settings
| Setting | Default | What it changes |
|---|---|---|
| Length | 14 | Bars in Wilder's average of gains and losses. Lower makes RSI more jumpy and more often extreme; higher makes it smoother. Minimum 1. |
| Source | Close | Which price each bar's change is measured on. Open, high, low and the averaged sources such as hl2 and hlc3 are also available. |
Adjust the period and price source in the indicator settings. The 70 and 30 levels are fixed.
Calculation
Each bar, the change from the previous bar is split into a gain (if positive) and a loss (if negative, taken as a positive number). Both are averaged with Wilder's smoothing, and their ratio is scaled onto 0 to 100:
gain = max(change, 0)
loss = max(-change, 0)
avg gain = Wilder average of gain over 14 bars
avg loss = Wilder average of loss over 14 bars
RSI = 100 - 100 / (1 + avg gain / avg loss)
(RSI = 100 when avg loss is 0)Wilder's average moves the previous value 1/length of the way towards each new bar, so with a length of 14 each bar contributes a fourteenth. That is slower than an exponential average of the same length, which would use 2/15. The average starts from the simple mean of the first 14 gains and losses, so the first RSI value appears on the 15th bar of history, once 14 changes exist.
When the window contains no down bars at all, the average loss is zero and the indicator returns 100 rather than an undefined value. This happens on real data during a hard run up.
Limitations
- Overbought is not a sell signal. In a strong uptrend RSI can sit above 70 for long stretches while price keeps rising, and the same is true below 30 in a downtrend.
- It lags. RSI is built from smoothed past changes, so it confirms what has already happened rather than anticipating it.
- Divergences can run for a long time. A bearish or bullish divergence can form, extend and fail without price reversing.
- The live candle moves. The current bar's value changes until that bar closes.
- It depends on timeframe, period and source. The same market gives a different RSI on 15m than on 1D, and the 70/30 levels mean different things at different lengths.
Frequently asked questions
The Relative Strength Index is a momentum oscillator that compares the average size of recent gains with the average size of recent losses and scales the result between 0 and 100. Readings near 100 mean up moves have dominated the window; readings near 0 mean down moves have.
The usual starting point is the two dashed levels. Above 70 is read as overbought and below 30 as oversold, by convention. Many traders also watch whether RSI is above or below 50, and look for divergence between RSI and price. None of these is a signal on its own, because RSI can stay at an extreme for as long as a trend lasts.
The gains and losses are averaged with Wilder's method, where each new bar moves the average 1/length of the way towards itself. This is the original definition of RSI. An ordinary exponential average reacts faster and would give noticeably different readings at the same length.
Yes. The indicator declares two inputs: Length, default 14 with a minimum of 1, and Source, default close. Open the indicator's settings on the chart to change them. The 70 and 30 levels are drawn at fixed values.
Values on bars that have already closed are not revised. The current candle's RSI moves while that candle is still live and settles when it closes. Because Wilder's average carries every earlier bar forward, loading older history recalculates it from a new starting point, and values near the very start of the loaded range can shift slightly.
Use the Add to chart button at the top of this page. It opens BTC/USDT on Binance in the Altrady Charts terminal with the built-in Relative Strength Index already applied. On any other market, open the indicator picker on the chart and choose Relative Strength Index from the Oscillator group.