Relative Strength Index (RSI)
period = 14 (2–200) Overview
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of directional price movements. It compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. The RSI oscillates between 0 and 100, making it a bounded oscillator that provides clear reference levels for traders.
Unlike many other oscillators, the RSI provides a smoothed calculation that reduces false signals while maintaining responsiveness to price changes. This balance between sensitivity and reliability has made it one of the most trusted indicators in technical analysis for over four decades.
Interpretation & Trading Signals
Overbought/Oversold Levels:
- Overbought (Above 70): Suggests the asset may be overvalued and due for a pullback
- Oversold (Below 30): Indicates the asset may be undervalued and due for a bounce
- Extreme Levels: Above 80 or below 20 indicate very strong momentum
Divergences:
- Bullish Divergence: Price makes lower low while RSI makes higher low (potential upward reversal)
- Bearish Divergence: Price makes higher high while RSI makes lower high (potential downward reversal)
- Hidden Divergences: Can signal trend continuation rather than reversal
Failure Swings:
- Bullish Failure Swing: RSI drops below 30, bounces above 30, pulls back holding above 30, then breaks prior high
- Bearish Failure Swing: RSI rises above 70, drops below 70, rallies failing to exceed 70, then breaks prior low
Example Usage
Code examples will be available once the Rust implementation is complete.
Performance Analysis
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