What Is the RSI (Relative Strength Index)?
In short
The Relative Strength Index (RSI) is a momentum oscillator that compares the size of recent price gains with the size of recent losses and expresses the result on a scale from 0 to 100.
The RSI was introduced by J. Welles Wilder Jr. in his 1978 book New Concepts in Technical Trading Systems. It summarises, in a single number between 0 and 100, how strongly an instrument has been closing higher or lower over a recent window of price bars. The window is usually 14 bars, which means 14 days on a daily chart and 14 weeks on a weekly chart.
The calculation first splits each bar's change in closing price into a gain or a loss. Wilder's smoothing then averages the gains and the losses separately, and the ratio of the two averages feeds the formula shown below. When gains dominate, the value moves toward 100; when losses dominate, it moves toward 0; a balance sits near the middle of the scale.
By convention, readings above 70 are labelled overbought and readings below 30 oversold. These labels describe how stretched recent momentum is within the window; they do not predict what comes next, and in a strong trend an instrument can stay above 70 or below 30 for a long time. The thresholds are a convention and not a rule of the market, and the window length changes the result: shorter windows swing more widely, longer ones more slowly.
Formula
RS = average gain over N bars / average loss over N bars
RSI = 100 - 100 / (1 + RS)
Wilder smoothing: new average = (previous average * (N - 1) + current value) / NThe formula is shown as code; N stands for the number of bars or periods.
Figures used in this guide
- 0
- lower bound of the RSI scale
- 14
- Wilder's default window, in price bars
- 30
- conventional oversold threshold
- 70
- conventional overbought threshold
- 100
- upper bound of the RSI scale
- 201
- number of verified candles Lzzo.com requires before it shows any indicator
Each number in the text is a definition, a convention or a stated value of the source, not a market observation.
How Lzzo.com shows it
The Technical indicators section of each product page shows RSI (14), calculated from observed daily or weekly candles. Lzzo.com calculates it only when it holds at least 201 verified candles; with fewer, the section says so and shows no value instead of an estimate. The reading describes past price action and is not a trading signal.
Related guides
Sources
- J. Welles Wilder Jr., New Concepts in Technical Trading Systems (Trend Research, 1978)
- John J. Murphy, Technical Analysis of the Financial Markets (New York Institute of Finance, 1999)
Primary and official sources, named as plain text.