RSI (Relative Strength Index)

How RSI works

RSI compares the average gain over N bars to the average loss. When gains dominate, RSI rises toward 100; when losses dominate, it falls toward 0. The default length is 14 bars.

Formula

RSI = 100 − (100 / (1 + RS)), where RS = average gain / average loss over N bars.

Mean reversion vs trend confirmation

RSI is typically used two ways:

1. Mean reversion — buy below 30, exit above 70. See RSI Mean Reversion.
2. Trend confirmation — long-only when RSI > 50, short-only when RSI < 50. Cuts trades against the prevailing trend.

RSI in Pine Script

rsi = ta.rsi(close, 14)
if rsi < 30
    strategy.entry("Long", strategy.long)