What is RSI? - Relative Strength Index - Fidelity Investments

The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and change of price movements. The RSI ... SkiptoMainContent. 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Share Share MutualFundsandMutualFundInvesting-FidelityInvestments Clickingalinkwillopenanewwindow. Facebook Twitter LinkedIn DefaulttextsizeA LargertextsizeA LargesttextsizeA Description TheRelativeStrengthIndex(RSI),developedbyJ.WellesWilder,isamomentumoscillatorthatmeasuresthespeedandchangeofpricemovements.TheRSIoscillatesbetweenzeroand100.TraditionallytheRSIisconsideredoverboughtwhenabove70andoversoldwhenbelow30.Signalscanbegeneratedbylookingfordivergencesandfailureswings.RSIcanalsobeusedtoidentifythegeneraltrend. Howthisindicatorworks RSIisconsideredoverboughtwhenabove70andoversoldwhenbelow30.Thesetraditionallevelscanalsobeadjustedifnecessarytobetterfitthesecurity.Forexample,ifasecurityisrepeatedlyreachingtheoverboughtlevelof70youmaywanttoadjustthislevelto80. Note:Duringstrongtrends,theRSImayremaininoverboughtoroversoldforextendedperiods. RSIalsooftenformschartpatternsthatmaynotshowontheunderlyingpricechart,suchasdoubletopsandbottomsandtrendlines.Also,lookforsupportorresistanceontheRSI. Inanuptrendorbullmarket,theRSItendstoremaininthe40to90rangewiththe40-50zoneactingassupport.DuringadowntrendorbearmarkettheRSItendstostaybetweenthe10to60rangewiththe50-60zoneactingasresistance.TheserangeswillvarydependingontheRSIsettingsandthestrengthofthesecurity’sormarket’sunderlyingtrend. Ifunderlyingpricesmakeanewhighorlowthatisn'tconfirmedbytheRSI,thisdivergencecansignalapricereversal.IftheRSImakesalowerhighandthenfollowswithadownsidemovebelowapreviouslow,aTopSwingFailurehasoccurred.IftheRSImakesahigherlowandthenfollowswithanupsidemoveaboveaprevioushigh,aBottomSwingFailurehasoccurred. Calculation TheRSIisafairlysimpleformula,butisdifficulttoexplainwithoutpagesofexamples.RefertoWilder'sbookforadditionalcalculationinformation.Thebasicformulais: RSI=100–[100/(1+(AverageofUpwardPriceChange/AverageofDownwardPriceChange))] RelatedIndicators MoneyFlowIndex(MFI) TheMFIisamomentumindicatorthatmeasurestheflowofmoneyintoandoutofasecurityoveraspecifiedperiodoftime. RateofChange(ROC) TheROCindicator,whichisalsoreferredtoassimplyMomentum,isapuremomentumoscillator. 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