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What is RSI? How to use the Relative Strength Index

The most used momentum indicator on TradingView: overbought, oversold, the 50 line and trend ranges.

What RSI is

RSI (Relative Strength Index) was introduced by J. Welles Wilder in 1978. It compares the size of recent up closes with recent down closes and returns a number from 0 to 100. RSI does not tell you where price will go; it tells you whether buyers or sellers currently have more momentum.

Formula: RSI = 100 − 100 / (1 + RS), where RS is the average gain divided by the average loss over the last 14 bars (Wilder smoothing).

Setting it up on TradingView

Search in IndicatorsRelative Strength Index
Length14 (default)
SourceClose
Levels70 / 50 / 30

How to read it

  • Above 70: overbought, price has risen fast. Below 30: oversold. These are warnings, not sell or buy orders.
  • The 50 line: RSI above 50 means buyers lead; below 50, sellers lead.
  • Trend ranges: in a strong uptrend RSI often swings between about 40 and 80 and bounces from 40–50; in a downtrend it tends to stay between 20 and 60 and gets capped at 50–60.

How to trade it

  1. Find the trend on a higher timeframe (for example H4 or D1).
  2. In an uptrend, wait for a pullback that takes RSI back to 40–50, then buy only when it turns back above 50 with a clear bullish candle.
  3. Put the stop below the latest swing low; take profit at resistance or when RSI rises above 70 and then rolls over.
  4. In a range, you can sell at resistance when RSI turns down from above 70 and buy at support when it turns up from below 30.
Watch outIn a strong trend RSI can stay above 70 (or below 30) for a long time. Selling just because RSI is overbought is the most common beginner mistake.

Common mistakes

  • Using RSI alone, without the trend or price levels.
  • Constantly changing the length to fit past data.
  • Ignoring the higher timeframe.
TipRSI works best together with support/resistance and divergence. See the RSI divergence lesson.

Try it on a chart

Educational content only, not investment advice. Practise on a demo account before using real money.