momentum Indicator
What Is Relative Strength Index (RSI)?
RSI is a momentum oscillator that measures the speed and magnitude of price changes on a scale of 0 to 100.
Quick Answer
RSI is a momentum oscillator that measures the speed and magnitude of price changes on a scale of 0 to 100.
What Does RSI Measure?
The Relative Strength Index (RSI) was developed by J. Welles Wilder Jr. in 1978. It compares the magnitude of recent gains to recent losses to determine overbought and oversold conditions. RSI oscillates between 0 and 100, with readings above 70 typically indicating overbought conditions and readings below 30 indicating oversold conditions.
Formula:
RSI = 100 - (100 / (1 + RS)), where RS = Average Gain / Average LossHow to Read RSI
- 1RSI above 70 suggests the asset may be overbought
- 2RSI below 30 suggests the asset may be oversold
- 3Divergence between RSI and price can signal potential reversals
- 4RSI can remain in overbought/oversold zones during strong trends
How to Use RSI in Trading
✓Identify overbought and oversold conditions
✓Spot potential trend reversals through divergence
✓Confirm trend strength
✓Generate buy/sell signals at extreme levels
RSI Settings
| Setting | Default | Description |
|---|---|---|
| Period | 14 | Number of periods for RSI calculation |
| Overbought Level | 70 | Level above which asset is considered overbought |
| Oversold Level | 30 | Level below which asset is considered oversold |
Common Mistakes to Avoid
✕Using RSI in isolation without price action confirmation
✕Assuming overbought always means sell (strong uptrends stay overbought)
✕Using default settings for all timeframes
✕Ignoring RSI divergence signals
Use RSI in VaultCharts
VaultCharts includes Relative Strength Index with customizable settings. Combine it with our automated pattern detection and trade signals for better analysis.