RSI (Relative Strength Index)
The most popular momentum oscillator: it bounds the strength of a move between 0 and 100 and flags overbought and oversold conditions.
The RSI (Relative Strength Index) was created in 1978 by J. Welles Wilder, an engineer turned trader who also invented the ATR and the ADX. It is a momentum oscillator: it measures the speed and magnitude of recent price changes and maps them onto a bounded 0-100 scale.
Its popularity comes from its readability: whatever the asset or timeframe, an RSI reads the same way. It is mainly used to spot overbought and oversold conditions, as well as divergences between price and momentum.
How it's calculated
The RSI compares the average of up-moves to the average of down-moves over the last N candles : 14 by default in Screener.Trading, the historical value chosen by Wilder. In practice: close-to-close changes are split into gains and losses, a smoothed average of each is computed, and gains are expressed as a share of total movement. If every candle is bullish, the RSI tends toward 100; if every candle is bearish, toward 0; a balanced market gravitates around 50.
Shortening the period (9, 7) makes the RSI more jittery and multiplies signals; lengthening it (21, 25) smooths it out and makes it more selective.
How to read it
- Above 70: overbought zone : the up-move is stretched and a pause or pullback becomes more likely.
- Below 30: oversold zone : the down-move is stretched, a technical bounce is possible.
- Around 50: the midline roughly separates bullish from bearish momentum; in an uptrend, the RSI often bounces off the 40-50 area.
- Divergences: price printing a new high while the RSI stalls signals a weakening move.
Mind the RSI's major limitation: in a strong trend, it can stay overbought or oversold for weeks. An RSI at 75 is not a sell signal in itself : it is sometimes, on the contrary, the mark of a powerful trend. The 30/70 thresholds work best in ranging markets; in trends, many traders shift them (for example 40/80 in an uptrend).
In the screener
The RSI lends itself especially well to screening because its thresholds are universal. Rule examples you can build in Screener.Trading: "RSI below 30 on D1" to list oversold assets; "RSI between 40 and 50 on D1" combined with "close above the 200 SMA" to spot pullbacks within an uptrend; "RSI above 50 on W1 and below 40 on H4" to cross a bullish underlying momentum with a short-term dip.
With automated scans, these rules become alerts: get an e-mail as soon as an asset in your universe enters the oversold zone on your chosen timeframe, without watching charts all day.
An oversold RSI is not an automatic buy signal: in a strong downtrend, it can stay below 30 for a long time. Always add a trend filter to your RSI rules.
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- GlossaryTimeframeA timeframe is the duration each candle on a chart represents (from one minute to several months) and sets the horizon of the analysis.
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