RSI (14)
Momentum
The Relative Strength Index (Welles Wilder, 1978): the best-known momentum oscillator. Measures the ratio between the average gain and the average loss over 14 days.
Construction & calculation
- Split the daily price changes into gains and losses.
- Compute the smoothed average of each over 14 periods.
- Divide the average of the gains by that of the losses (= RS) and normalize to a scale of 0 to 100.
RS = average gain(14) / average loss(14)
RSI = 100 - 100 / (1 + RS)
Interpretation
- RSI below 30: oversold. Selling pressure has been exceptionally strong; a technical recovery becomes more likely.
- RSI above 70: overbought. Buying pressure is extreme; a breather or correction is to be expected.
- RSI around 50 = balance. In an uptrend the RSI rarely dips below 40; in a downtrend it rarely gets above 60.
- Divergence is the most powerful use: price makes a new high, RSI does not — momentum is weakening under the hood.
How the signal works in this scanner
Buy signal (green)The RSI(14) is at 30 or lower (oversold).
Sell signal (red)The RSI(14) is at 70 or higher (overbought).
Watch-outs & pitfalls
- In a powerful trend the RSI can stay overbought or oversold for weeks. 'Overbought' is not a sell signal, it is a warning.
- This scanner gives the level signal (<=30 / >=70), not the divergence. If you want the dynamic variant with moving thresholds, look at Dynamic RSI.