Rsi Calculator
Use our free Rsi Calculator to plan your technical analysis strategy. Get detailed breakdowns, charts, and actionable insights.
Formula
RSI = 100 - (100 / (1 + RS)) where RS = Average Gain / Average Loss
The Relative Strength (RS) is the ratio of the average upward price change to the average downward price change over the lookback period. RSI normalizes this ratio to a 0-100 scale. Values above 70 indicate overbought conditions, below 30 indicate oversold.
Worked Examples
Example 1: Standard RSI Calculation (14-period)
Problem: Over the last 14 periods, the average gain is 1.20 and the average loss is 0.80. Calculate the RSI value.
Solution: RS = Average Gain / Average Loss = 1.20 / 0.80 = 1.50\nRSI = 100 - (100 / (1 + RS))\nRSI = 100 - (100 / (1 + 1.50))\nRSI = 100 - (100 / 2.50)\nRSI = 100 - 40.00 = 60.00
Result: RSI = 60.00 (Bullish Momentum - above 50 centerline, below overbought 70)
Example 2: Oversold RSI Signal
Problem: A stock shows average gain of 0.30 and average loss of 1.50 over 14 periods. Interpret the RSI.
Solution: RS = Average Gain / Average Loss = 0.30 / 1.50 = 0.20\nRSI = 100 - (100 / (1 + 0.20))\nRSI = 100 - (100 / 1.20)\nRSI = 100 - 83.33 = 16.67\nRSI below 30 = Oversold territory\nRSI below 20 = Extremely oversold
Result: RSI = 16.67 (Extremely Oversold - strong potential buy signal, watch for reversal confirmation)
Frequently Asked Questions
What is the Relative Strength Index (RSI) and how is it calculated?
The Relative Strength Index (RSI) is a momentum oscillator developed by J. Welles Wilder Jr. in 1978 that measures the speed and magnitude of price changes on a scale from 0 to 100. The RSI is calculated using the formula RSI equals 100 minus 100 divided by 1 plus RS, where RS (Relative Strength) is the average gain divided by the average loss over a specified period, typically 14 periods. The average gain is calculated by summing all upward price changes over the lookback period and dividing by the period length. The average loss uses the same method for downward changes. After the initial calculation, a smoothed moving average is applied using the formula: new average equals previous average times 13 plus current value, all divided by 14.
What do overbought and oversold RSI levels mean for trading?
Traditional RSI interpretation considers readings above 70 as overbought and readings below 30 as oversold. An overbought reading suggests that the asset has experienced strong upward momentum and may be due for a pullback or consolidation, potentially signaling a sell opportunity. An oversold reading indicates strong downward momentum and a potential buying opportunity as the price may bounce. However, during strong trending markets, RSI can remain overbought or oversold for extended periods. In a strong uptrend, RSI may stay between 40 and 90, while in a strong downtrend it may range between 10 and 60. Many experienced traders adjust these levels to 80/20 in trending markets for more reliable signals.
What is RSI divergence and why is it important for traders?
RSI divergence occurs when the price movement and the RSI indicator move in opposite directions, potentially signaling a trend reversal. Bullish divergence happens when price makes a lower low while RSI makes a higher low, suggesting waning selling pressure and a potential upward reversal. Bearish divergence occurs when price makes a higher high while RSI makes a lower high, indicating weakening buying momentum and a potential downward reversal. Hidden divergence works in the opposite direction and confirms trend continuation rather than reversal. Divergence is considered one of the most powerful RSI signals because it reveals underlying momentum shifts before they become apparent in price action, giving traders an early warning of potential trend changes.
What RSI period length should I use for different trading timeframes?
The default 14-period RSI works well for most applications, but different timeframes benefit from adjustments. For day trading on 1 to 15 minute charts, shorter periods of 7 to 10 produce more responsive signals that capture quick momentum shifts, though they generate more false signals. For swing trading on daily charts, the standard 14-period balances responsiveness with reliability. For longer-term position trading on weekly charts, periods of 14 to 21 smooth out noise and provide more reliable signals. Some traders use multiple RSI periods simultaneously, such as a 7-period for entry timing and a 14-period for trend confirmation. Shorter periods make the RSI more volatile and reactive while longer periods create smoother readings that filter out short-term fluctuations.
How should RSI be combined with other technical indicators for best results?
RSI is most effective when used in conjunction with complementary technical indicators rather than in isolation. Combining RSI with moving averages provides trend context: only take RSI buy signals when price is above the 200-day moving average and sell signals when below it. MACD (Moving Average Convergence Divergence) confirms RSI momentum signals when both indicators agree on direction. Bollinger Bands combined with RSI help identify overextended price moves when RSI is extreme and price touches or exceeds the bands. Volume confirmation strengthens RSI signals because reversals accompanied by increasing volume are more reliable. Support and resistance levels provide price targets and entry points when RSI signals align with key chart levels. This multi-indicator approach significantly reduces false signals compared to using RSI alone.
How do I interpret the result?
Results are displayed with a label and unit to help you understand the output. Many calculators include a short explanation or classification below the result (for example, a BMI category or risk level). Refer to the worked examples section on this page for real-world context.