Relative Strength Index (RSI) Calculator
Category: Technical AnalysisCalculate RSI values to identify overbought and oversold conditions, divergence patterns, and potential market reversals
Price Data Input
RSI Parameters
Understanding RSI (Relative Strength Index)
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements on a scale from 0 to 100. It was developed by J. Welles Wilder Jr. and introduced in his 1978 book "New Concepts in Technical Trading Systems."
How RSI Works
RSI compares the magnitude of recent gains to recent losses to determine overbought and oversold conditions:
Where RS (Relative Strength) = Average Gain / Average Loss over a specified period.
- RSI > 70: Traditionally considered overbought (potential sell signal)
- RSI < 30: Traditionally considered oversold (potential buy signal)
- RSI = 50: Centerline, can indicate momentum shifts when crossed
Interpreting RSI
- Overbought/Oversold: Values above 70 indicate overbought conditions, while values below 30 indicate oversold conditions
- Divergence: When price makes a new high/low but RSI doesn't confirm with its own new high/low, suggesting potential reversal
- Failure Swings: When RSI crosses above 30 (bullish) or below 70 (bearish) after failed attempts to break these levels
- Centerline Crossovers: RSI crossing above 50 can indicate bullish momentum, while crossing below 50 can indicate bearish momentum
RSI Trading Strategies
Overbought/Oversold Reversals
The classic approach is to sell when RSI moves above 70 (overbought) and buy when RSI drops below 30 (oversold). However, during strong trends, RSI can remain in overbought/oversold territory for extended periods.
Refinement: Wait for RSI to cross back below 70 or above 30 before taking action, confirming the reversal.
RSI Divergence
Bullish Divergence: Price makes lower lows while RSI makes higher lows, suggesting weakening downward momentum.
Bearish Divergence: Price makes higher highs while RSI makes lower highs, suggesting weakening upward momentum.
Divergences can be powerful signals of potential reversals, especially at market extremes.
Failure Swings
A bullish failure swing occurs when RSI moves below 30 (oversold), rallies above 30, pulls back without breaking below 30, then breaks its previous high.
A bearish failure swing occurs when RSI moves above 70 (overbought), drops below 70, rallies without breaking above 70, then breaks its previous low.
Centerline Crossovers
The 50 level on the RSI can act as support in bullish markets and resistance in bearish markets.
Buy when RSI crosses above 50 in an uptrend, sell when RSI crosses below 50 in a downtrend.
This approach is particularly useful for trend-following strategies.
Tips for Using RSI Effectively
- Combine with other indicators - RSI works best when confirmed by other technical analysis tools like moving averages, MACD, or price patterns
- Adjust time periods - Standard 14-period RSI works well for many situations, but shorter periods (e.g., 9) create more sensitive readings, while longer periods (e.g., 25) generate smoother readings with fewer signals
- Respect the trend - During strong uptrends, RSI often remains above 40, while during strong downtrends, it often stays below 60
- Watch for divergence - RSI divergence can be one of the most reliable indicators of potential trend reversals, especially at market extremes
- Adapt overbought/oversold levels - In strong bull markets, adjust overbought to 80 and oversold to 40; in strong bear markets, adjust overbought to 60 and oversold to 20
RSI Levels and What They Indicate for Current Market Momentum
Based on your recent RSI calculator results, the Relative Strength Index is signaling a key moment in momentum dynamics. Whether your reading came in above 70, below 30, or near the midline, each level tells a different story about potential reversals, continuation patterns, or sideways consolidation. Traders use RSI not just for its absolute values, but for the speed and direction of change—details that become especially relevant when overbought or oversold zones are breached.
Signals to Watch in Your RSI Output
Let’s break down what your RSI calculation reveals and how traders typically react:
- RSI above 70: This typically suggests the asset is overbought. Momentum has been strong, but the risk of a pullback grows. Some traders use this as a sell signal, particularly if RSI begins to decline after topping.
- RSI below 30: Often read as an oversold condition, which may present a buying opportunity if other confirmations (like bullish divergence or support zones) line up.
- RSI near 50: Neutral territory. A cross above 50 may support a bullish view, especially if aligned with a trend, while a drop below 50 may reinforce bearish sentiment.
The current RSI trend and comparison to price movement matter, too. For instance:
- Bullish Divergence: Price makes a lower low, but RSI makes a higher low—hinting that selling momentum is fading. Potential reversal setup.
- Bearish Divergence: Price makes a higher high, but RSI makes a lower high—suggesting the uptrend is running out of steam.
- Trend Direction: A rising RSI trend over 5 periods reinforces bullish bias, while a declining RSI signals weakening momentum.
Risk Considerations Tied to RSI Conditions
While RSI can offer timely insights, it’s not a crystal ball. Several risks deserve attention:
- Extended Overbought/Oversold Conditions: RSI can stay above 70 or below 30 during strong trends. Acting too early can lead to false reversals.
- False Divergences: Not every divergence leads to a reversal. Combining with volume, support/resistance levels, or candlestick patterns can help confirm setups.
- Centerline Noise: RSI crossing 50 can be a useful trend confirmation, but in choppy markets, it may generate mixed signals.
Context is key. An RSI of 75 in a breakout rally means something different than the same reading in a range-bound pair. Similarly, a reading of 28 in a risk-off environment might still fall short of triggering a rebound.
What to Do After Reviewing Your RSI Output
Now that you’ve run the numbers, here are some practical tips for integrating your RSI reading into a broader trading plan:
- Confirm with Price Action: Use chart patterns, support/resistance, or candlestick formations to back up what RSI is suggesting.
- Check for Divergence: If your results show “bullish divergence” or “bearish divergence,” scan your charts for swing highs/lows that reinforce the signal.
- Adjust Overbought/Oversold Zones: In strong trends, consider raising the overbought level to 80 or lowering the oversold level to 20 to reduce whipsaws.
- Use RSI with Trend Tools: Combine with moving averages or trendlines to filter signals. For instance, only take oversold RSI setups if price is above the 200-day moving average.
Also, note the signal strength noted in your summary. A “Moderate” or “Strong” rating reflects how convincingly RSI is supporting a buy or sell scenario—handy when prioritizing trade ideas.
Next Steps with Your RSI Analysis
Whether your current RSI reading suggests a hold, buy, or sell, your next move should be grounded in confirmation and context. If the signal is strong and divergence aligns, that might justify a watchlist add or a partial position. If momentum looks uncertain, it could be worth waiting for a clearer breakout or breakdown.
RSI is most powerful when used as part of a toolkit—not in isolation. Keep an eye on trend direction, market sentiment, and upcoming catalysts. Use what the RSI is telling you to ask better questions about the chart in front of you: Is this trend exhausted? Is momentum building? Are buyers or sellers in control? From there, the strategy becomes clearer.