Relative Strength Index.
The Relative Strength Index Technical Indicator (RSI) is a price-following oscillator that ranges between 0 and 100. When Wilder introduced the Relative Strength Index, he recommended using a 14-period RSI. Since then, the 9-period and 25-period Relative Strength Index indicators have also gained popularity. A popular method of analyzing the RSI is to look for a divergence in which the security is making a new high, but the RSI is failing to surpass its previous high. This divergence is an indication of an impending reversal. When the Relative Strength Index then turns down and falls below its most recent trough, it is said to have completed a "failure swing". The failure swing is considered a confirmation of the impending reversal.
The following signals of Relative Strength Index are used in chart analyzing:
The Relative Strength Index usually tops above 70 and bottoms below 30. It usually forms these tops and bottoms before the underlying price chart. Chart Formations.
The RSI often forms chart patterns such as head and shoulders or triangles that may be or may not be visible on the price chart. Failure Swing (Support or Resistance breakout)
This is where the Relative Strength Index surpasses a previous high (peak) or falls below a recent low (trough). Support and Resistance levels.
The Relative Strength Index shows, sometimes more clearly than price themselves, levels of support and resistance. Divergences.
As discussed above, divergences occur when the price makes a new high (or low) that is not confirmed by a new high (or low) in the Relative Strength Index. Prices usually correct and move in the direction of the RSI.
You can test the trade signals of this indicator by creating an Expert Advisor in MQL5 Wizard.
Calculation.
This is the main formula of Relative Strength Index calculation:

Relative Strength Index - RSI.
What is the 'Relative Strength Index - RSI'
The relative strength index (RSI) is a momentum indicator developed by noted technical analyst Welles Wilder, that compares the magnitude of recent gains and losses over a specified time period to measure speed and change of price movements of a security. It is primarily used to attempt to identify overbought or oversold conditions in the trading of an asset.
BREAKING DOWN 'Relative Strength Index - RSI'
The relative strength index is calculated using the following formula:
RSI = 100 - 100 / (1 + RS)
Where RS = Average gain of up periods during the specified time frame / Average loss of down periods during the specified time frame/
The RSI provides a relative evaluation of the strength of a security's recent price performance, thus making it a momentum indicator. RSI values range from 0 to 100. The default time frame for comparing up periods to down periods is 14, as in 14 trading days.
Traditional interpretation and usage of the RSI is that RSI values of 70 or above indicate that a security is becoming overbought or overvalued, and therefore may be primed for a trend reversal or corrective pullback in price. On the other side of RSI values, an RSI reading of 30 or below is commonly interpreted as indicating an oversold or undervalued condition that may signal a trend change or corrective price reversal to the upside.
Tips on Using the RSI Indicator.
Sudden large price movements can create false buy or sell signals in the RSI. It is, therefore, best used with refinements to its application or in conjunction with other, confirming technical indicators.
Some traders, in an attempt to avoid false signals from the RSI, use more extreme RSI values as buy or sell signals, such as RSI readings above 80 to indicate overbought conditions and RSI readings below 20 to indicate oversold conditions.
The RSI is often used in conjunction with trend lines, as trend line support or resistance often coincides with support or resistance levels in the RSI reading.
Watching for divergence between price and the RSI indicator is another means of refining its application. Divergence occurs when a security makes a new high or low in price but the RSI does not make a corresponding new high or low value. Bearish divergence, when price makes a new high but the RSI does not is taken as a sell signal. Bullish divergence that is interpreted as a buy signal occurs when price makes a new low, but the RSI value does not. An example of bearish divergence can unfold as follows: A security rises in price to $48 and the RSI makes a high reading of 65. After retracing slightly downward, the security subsequently makes a new high of $50, but the RSI only rises to 60. The RSI has bearishly diverged from the movement of price.

Rsi forex formula

Relative Strength Index (RSI) - is another great momentum indicator developed by Welles Wilder.
Standard period settings for RSI is 14 periods, which can be applied to any time frame.
RSI indicator compares the average of up and down closes for a specific period of time.
Quick Summary.
Trading with RSI indicator involves the following signals:
• RSI moving above 50 level — uptrend is confirmed, below 50 — downtrend is confirmed.
• RSI peaking above 70 level — market is overbought.
• RSI staying above 70 level — uptrend is running strong.
• RSI exiting 70 level — downtrend is underway, or at least a correction down is due. (Opposite for RSI falling below 30.)
• RSI trend line breakout - early warning about chart trend line breakout.
• RSI diverging from price on the chart — an early warning of a possible trend change.
Let's review each of these RSI signals below.
How to trade with RSI indicator.
RSI indicator is often referred as an overbought/oversold indicator, however, this is not exactly accurate. RSI doesn't provide Buy/Sell signals upon reaching oversold/overbought areas, there are certain rules, which help to identify the right timing for entries and exits.
Readings above 70 indicate an overbought market, while readings below 30 indicate an oversold market.
However, once RSI advances above 70 it is not yet a signal for an immediate Selling, since RSI may stay in overbought area for a long-long time. In fact, when a strong uptrend develops, readings above 70 are just a beginning of a great upward move; an opposite is true for a downtrend and readings below 30.
In order to enter at the right moment (on the true market reversal) Forex traders should wait for RSI to leave its overbought/oversold area. For example, when RSI goes above 70, Forex traders would prepare to Sell, but the actual trade will take place only when RSI crosses down below 70.
Opposite true for an oversold RSI: once RSI goes below 30, traders wait for the indicator to come out of an oversold area and rise above 30 before placing a Buy order.
Forex traders also use 50 level of the RSI indicator, which separates buying forces from selling forces on the market. Certain trading strategies use RSI 50 level to confirm Long and Short entries by looking at a positioning of the RSI in relation to its 50 level.
RSI trend lines.
RSI indicator has got another handy feature: Forex traders use RSI to draw trend lines.
While RSI's trend line stays intact, it confirms that a trend holds well.
With RSI trend lines Forex traders are able to receive a much earlier warning about upcoming trend changes since RSI trend lines witness a breakout few candles earlier than chart trend lines.
RSI trend lines are especially useful on large time frames.
Trading divergence with RSI indicator.
Another way to exploit RSI is to take advantage of RSI divergence signals.
When RSI approaches 30 look for a bullish divergence => slowly rising RSI versus already declining prices.
When RSI approaches 70 traders watch for a bearish divergence, which occur when actual RSI readings begin to decline while prices continue climbing up. RSI Divergence suggests that a current momentum is over and traders should look to protect their profits and be ready to trade in the opposite direction.
The best way to learn about any indicators is to read original works of their creators.
Therefore, let's turn to the book where J. Welles Wilder tells about his research on RSI indicator:
"(3) Failure Swings: Failure swings above 70 or below 30 are very strong indications of a market reversal. (See Fig. 6.3 and Fig. 6.4)"
"(5) Divergence: Although divergence does not occur at every turning point, it does occur at most significant turning points. When divergence begins to show up after a good directional move, this is a very strong indication that a turning point is near. Divergence is the single most indicative characteristic of the Relative Strength Index."
RSI indicator Formula.
RSI = 100 - 100 / (RS + 1)
RS = Average Upward Price Change / Average Downward Price Change.
Average Upward Price Change = [(previous Average Upward Price Change) x 13 + current Upward Change] / 14.
First Average Upward Change = Total of Upward Changes during past 14 periods / 14.
Average Downward Price Change = [(previous Average Downward Price Change) x 13 + current Downward Change] / 14.
First Average Downward Change = Total of Upward Changes during past 14 periods / 14.
For calculation Downward Price Changes are taken as positive values.
trader.
explanation concise and helpful, thank you.
Well explained RSI!
Adding to the subject: RSI is also known to form patterns, such as wedges, triangles, double tops and bottoms, head and shoulders etc. Daily charts are perfect to watch these patterns. RSI breakouts from own patterns often happen 1-2 days earlier than price breakouts on the charts, providing an invaluable information to a trader.
FxIndicators.
Default RSI 14 can be enhanced & filtered with another shorter period RSI, for example RSI 3, RSI 6.
The advantage a longer default RSI is that it uses a longer time period and thus produces less false signals, however, it will lag more. The shorter period RSI will give the less of a lag when it comes to identifying important turning points.
Using default RSI (14) and a shorter RSI (6) in conjunction gives a certain edge in reading chart signals: signals which are not distinctive on the 14 RSI stand out more clearly on the 6 RSI chart.
At times 6 RSI will lead, but other times it'll go together with 14 RSI, which allows to distinguish stronger signals and filter out least important ones.
best rsi tutorial ive read yet.
The formula is wrong. The right one is:
RSI = 100 - 100 / (RS + 1)
FxIndicators.
Thanks a lot indeed!
thank you so much for this awsome site.
Very well explained.
thanx forex-indicators Team.
very easy to understand.
Hi there, should'nt they be reversed, taken from above.
When RSI approaches 30 look for a bullish divergence => slowly rising RSI versus already declining prices.
When RSI approaches 70 traders watch for a bearish divergence, which occur when actual RSI readings.
FxIndicators.
I don't think so.
A Bullish divergence is formed when RSI is at the bottom and begins to rise, while price keeps making new lows.
A Bearish divergence - RSI at the top starting to decline.
I have no words to thank you for your well explained lessons Thanks a lot !!
amazing stuff here. please keep up the excellent work.
excellent explanation. hope to hit the jack pot with it. more grease to you.
This is really clear and well explained. It really helped to understand better of RSI, thank you guys.
trader.
how do i get the rsi indicator on my platform.
FxIndicators.
In MT4 you'll do it from Menu: Insert, Indicators, Oscillators, Relative Strength Index.
In other platforms it'll take different steps, so just ask your broker for a help or a platform tutorial.
simple but best explaintion.
its not only a formula its like a philosophy. by sarathi.
if u know the rsi u definetly earn high profit.
"Using default RSI (14) and a shorter RSI (6) in conjunction gives a certain edge in reading chart signals: signals which are not distinctive on the 14 RSI stand out more clearly on the 6 RSI chart."
Brilliant! Taking your lead I am putting RSI (13) and RSI (5) in the same window box. The cross provides an excellent signal. I had given up on the RSI but, this works really slick. I have developed my strategies using more information from your site than all other sources combined. Even though I have read it all more than once I keep coming back for new inspiration and ideas I didn't think of previously. Thank you very much!
Most Excellent! I can't say enough about how well you detailed this information into the simple facts and how to use the tools of the trade. Bravo!
Absolute amazing stuff, understand it for the first time as clear as a bell and my account can proof it. Why could I not see it myself earlier on? As kid we would lie on the grass staring at the clouds, playing a game to see what object a cloud would form, to one the cloudformation would look like a house, to the other an old man, to the next a lion or a mountain. Everytime we had to explain to the others what we are seeing and then only would they also see a lion. Thank you so much, my friend.
My professor asked us a question in class that no one was able to answer.
When RSI approaches 70 and above, that's usually an indicator to sell. However, there's one scenario when the RSI reaches 70, 80, or even 90, people should buy.
His question was why would they buy if the prices increased?

StochRSI.
What is the 'StochRSI'
StochRSI is an indicator used in technical analysis that ranges between zero and one and is created by applying the Stochastic Oscillator formula to a set of Relative Strength Index (RSI) values rather than standard price data. Using RSI values within the Stochastic formula gives traders an idea of whether the current RSI value is overbought or oversold - a measure that becomes specifically useful when the RSI value is confined between its signal levels of 20 and 80.
BREAKING DOWN 'StochRSI'
The StochRSI was developed by Tushar Chande and Stanley Kroll and detailed in the book The New Technical Trader published in 1994. While technical indicators already existed to show overbought and oversold levels, the two developed StochRSI to improve sensitivity and generate a greater number of signals than traditional indicators.
StochRSI is calculated using the following formula:
StochRSI = (RSI - Lowest Low RSI) / (Highest High RSI - Lowest Low RSI)
Using the StochRSI.
The StochRSI is a second derivative of price, which means that it doesn't always look similar to the price. The indicator deemed to be oversold when the value drops below 0.20, meaning the RSI value is trading at the lower end of its predefined range, and that the short-term direction of underlying security may be nearing a correction. Conversely, a reading above 0.80 suggests the RSI may be reaching extreme levels and could be used to signal a pullback in the underlying security.
In addition, StochRSI can be used to identify short-term trends by looking at it in the context of an oscillator with a centerline at 0.50. When the StochRSI is above 0.50, the security may be seen as trending higher and vice versa when it's below 0.50. The downside to using the StochRSI for these reasons is that it tends to be quite volatile, which means that some smoothing may be needed. Some traders will take a moving average of the StochRSI to reduce the volatility and make the indicator more useful. For example, a 10-day simple moving average of the StochRSI can produce an indicator that's much smoother and more stable.
Of course, the StochRSI should also be used in conjunction with other technical indicators or chart patterns to maximize effectiveness, especially given the high number of signals that it generates. Non-momentum oscillators, such as the Accumulation Distribution Line, may be particularly helpful because they don't overlap in terms of functionality and provide additional insights.