Relative Strength Index (RSI)

How strongly the recent closes have risen against how strongly they have fallen, from 0 to 100.

What it measures

RSI compares the average size of up closes with the average size of down closes. 100 means every recent change was a gain, 0 means every one was a loss, and 50 means they balanced.

How traders read it

Traders treat readings above 70 as overbought and below 30 as oversold, and the chart draws those lines. In a strong trend RSI can stay above 70 or below 30 for a long time, so many traders use the crossing back through the line, or a divergence from the price, rather than the reading itself.

Formula

change = close − previous close
average gain, average loss = averages of the first periods gains and losses
then, each bar: average = (average(previous bar) × (periods − 1) + this bar's gain or loss) / periods
RS = average gain / average loss
RSI = 100 − 100 / (1 + RS)        (100 when there were no losses, 0 when there was no movement)

This is Wilder’s smoothing. The first change is measured from the close of the bar before the run starts, so the first value comes after periods changes.

Settings and output

Call: rsi(periods)

Setting	Chart default
`periods`: Periods	14

What you get: a number.

Warm-up: with rsi(14), it asks for 0 bars of history and a run-up of 29, and its first value came on bar 15 of the example data.

Chart

Relative Strength Index (RSI) drawn by its own code on example prices

The prices are made up, hourly, and the same on every page, so the chart shows how the indicator behaves, not how a market behaved.

In an algorithm

function onIntervalClose() {
  const value = rsi(14);
  if (OPEN_POSITIONS_COUNT === 0 && value < 30) {
    openPosition("BUY", { quantity: 10000, stopLossPips: 25, takeProfitPips: 40 });
  }
  if (OPEN_POSITIONS_COUNT > 0 && value > 70) {
    closeAllPositions();
  }
}