RSI (Relative Strength Index) is a momentum indicator that measures the strength of a price movement relative to previous periods. Values below 30 suggest the asset may be oversold — a potential buying opportunity; values above 70 indicate it may be overbought — a potential selling zone. RSI is typically calculated over 14 periods and is applied to stocks, commodities, currencies, and cryptocurrencies.

What is RSI? — Relative Strength Index explained

RSI was developed by J. Welles Wilder and published in 1978 in his book New Concepts in Technical Trading Systems. It is one of the most widely used technical indicators in the world and is built into virtually every charting platform. RSI is an oscillator — its value always moves between 0 and 100.

How is RSI calculated?

RSI is calculated in three steps:

1. Calculate the average gain (AG) and average loss (AL) over the past 14 periods.
2. Calculate Relative Strength: RS = AG / AL
3. Calculate RSI: RSI = 100 − (100 / (1 + RS))

In practice, you never need to calculate this by hand — all modern charting tools do it automatically. What matters is understanding what RSI measures: the strength of gains relative to losses over the measurement period.

How to interpret RSI values

RSI below 30 — oversold zone

When RSI falls below 30, the asset has declined sharply relative to its history. This is traditionally read as a potential buying opportunity — the price may have fallen too far too fast and a bounce is possible. Important: oversold does not equal a reversal signal. An asset can hold RSI below 30 for weeks during a strong downtrend.

RSI above 70 — overbought zone

RSI above 70 signals that price has rallied strongly. Traditionally it is read as the asset being "expensive" in the short term and that a consolidation or pullback may follow. Again: overbought does not equal a sell signal in a strong uptrend.

RSI 50 — the midline

The midline at 50 is used by many traders to distinguish between short-term bull and bear markets. RSI consistently above 50 indicates buyers are in control; below 50, sellers dominate.

RSI divergences — a powerful signal

Divergences occur when price and RSI move in opposite directions. This is one of the strongest signals RSI can give:

• Bullish divergence: price sets a lower low, but RSI sets a higher low. Signals weakening selling pressure — potential reversal upward.
• Bearish divergence: price sets a higher high, but RSI sets a lower high. Signals weakening buying pressure — potential reversal downward.

Divergences give strong signals but can persist for a long time before a reversal actually occurs. Always combine with other signals — such as a break of a key support or resistance zone.

RSI in practice — commodities and currencies

RSI works well for identifying potential turning points in commodity prices. On guldpris.nu and silver.nu you can follow gold and silver price charts — apply RSI to these via a platform such as TradingView to see current signals.

For currency traders, RSI is equally applicable to major pairs such as EUR/USD, GBP/USD, and USD/JPY. Combine with real-time exchange rate data and RSI analysis in your trading platform for a more complete picture.

Stock traders can read more about how RSI is used together with other tools at aktie.se.

Adjusting RSI settings

Shorter and longer periods

The default 14-period setting is a solid starting point, but it can be adjusted:

• RSI 7–9: more sensitive — more signals, more false positives. Suited to intraday trading.
• RSI 14: the standard — a good balance for daily and weekly charts.
• RSI 21–25: slower — fewer but more reliable signals. Better for swing trading and longer timeframes.

Adjusted zone thresholds

In strong up- or downtrends, many traders adjust the thresholds. In a strong uptrend, RSI may oscillate between 40 and 90 — using 40 as the oversold boundary instead of 30 may be more relevant. Experiment with historical data for the specific asset you are trading.

Frequently asked questions about RSI

Can you trade on RSI alone?

Not recommended. RSI generates the most false signals in strongly trending markets — a trend can keep the RSI below 30 for weeks. Combining RSI with a trend filter (e.g., price above or below SMA 200) significantly improves the signal quality.

What is the difference between RSI and Stochastic?

The Stochastic Oscillator measures where the current price sits relative to the high-low range over a given period. RSI measures the strength of gains versus losses. Both are oscillators in the 0–100 range and produce similar signals, but they react differently in trending markets. RSI is generally considered more robust in trend-driven conditions.

How is RSI used in algorithmic trading?

RSI is one of the most common indicators in algorithmic trading strategies. A simple RSI strategy: buy when RSI < 30 and close when RSI > 50; sell/short when RSI > 70 and close when RSI < 50. Backtesting on historical data should always be performed — and results interpreted with caution due to the risk of overfitting.

Does RSI work on all timeframes?

RSI can be applied to any timeframe — from 1-minute to monthly charts. Signals on longer timeframes (daily, weekly) tend to be more reliable than on shorter ones (1–15 minutes). Always check RSI across multiple timeframes for a complete picture.

Want to understand RSI in a broader context? Read our introduction to technical analysis.