Relative Strength Index (RSI)
A 0–100 momentum gauge of average gain vs. loss; above 70 is overbought, below 30 oversold.
How to read it
RSI oscillates between 0 and 100. Above 70 the market is considered overbought (buyers may be exhausted → risk of a pullback); below 30 it's oversold (sellers may be exhausted → risk of a bounce). The 50 centerline separates bullish momentum (above) from bearish (below).
Trading signals
A common long trigger is RSI crossing up through 30 (leaving oversold); a short/exit trigger is a cross down through 70. In a strong trend RSI can sit overbought or oversold for a long time, so pair it with a trend filter on a higher timeframe rather than trading every touch.
Divergence
Divergence is one of RSI's strongest signals. Bullish divergence: price makes a lower low while RSI makes a higher low — momentum is fading on the downside, warning of a reversal up. Bearish divergence is the mirror: price a higher high, RSI a lower high — a possible top.
Parameters
Length sets the sensitivity: a short length (e.g. 7) reacts fast but whipsaws more; a longer length (e.g. 21) is smoother but lags. The optional MA and Bollinger-band settings draw a smoothing line / bands over the RSI itself, which some strategies cross instead of the fixed 30/70 levels.
- RSI Length
- Bars over which RSI averages gains and losses.
- RSI MA Type
- Averaging method for the MA line over RSI.
- RSI MA Length
- Bars in the MA smoothing line over RSI.
- RSI BB Multiplier
- Std-dev multiplier for RSI's Bollinger bands.