A guide to using RSI on TradingView

RSI indicator overview

The Relative Strength Index (RSI) is one of the most widely used momentum indicators in technical analysis. On TradingView, it typically appears in a separate panel beneath the price chart and moves on a scale from 0 to 100.

Traders use RSI to assess the strength of recent price movements and identify when momentum may be becoming unusually strong or weak. It can also highlight differences between price and momentum, known as divergence, but RSI cannot predict where the market will move next.

What RSI measures

The Relative Strength Index measures the speed and magnitude of recent price changes by comparing average gains with average losses over a selected period.

Higher RSI readings indicate stronger upward momentum, while lower readings indicate stronger downward momentum. Despite its name, RSI measures the momentum of an individual instrument rather than comparing its strength with another market or asset.

RSI is a bounded oscillator, meaning its value remains between 0 and 100:

• A reading approaching 100 reflects strong upward momentum.
• A reading approaching 0 reflects strong downward momentum.
• A reading around 50 suggests that average gains and losses are relatively balanced.

The most commonly used reference levels are 70 and 30. Readings above 70 are traditionally described as overbought, while readings below 30 are described as oversold. These levels indicate potentially stretched momentum rather than providing automatic signals to buy or sell.

RSI history and origin

The Relative Strength Index was developed by technical analyst J. Welles Wilder Jr. and introduced in his 1978 book, New Concepts in Technical Trading Systems.

Wilder originally developed RSI for analysing commodity markets, but the indicator is now used across forex, shares, indices and commodities.

Other analysts have since developed different ways of interpreting RSI. Andrew Cardwell, for example, focused on using RSI within existing trends rather than assuming that every extreme reading or divergence signals an approaching reversal.

How RSI is calculated

TradingView calculates RSI using price changes over a selected number of bars. Positive price changes contribute to the average gain, while negative price changes contribute to the average loss.

The formula is:

RSI = 100 − [100 ÷ (1 + RS)]

Where:

RS = Average gain ÷ Average loss

TradingView uses Wilder’s smoothing method to calculate the average gains and losses. In Pine Script, this is represented by the RMA function. The platform then calculates and displays the RSI automatically.

By default, TradingView uses a 14-period RSI based on closing prices. The meaning of those 14 periods depends on the chart timeframe. On a daily chart, RSI uses 14 daily bars; on a one-hour chart, it uses 14 one-hour bars.

Adding RSI on TradingView

TradingView includes a built-in Relative Strength Index indicator that can be added directly to Supercharts. Once added, RSI appears in a separate panel beneath the price chart, where you can adjust its calculation and display settings.

How to add RSI to a chart

Follow these steps to add RSI on TradingView:

1. Open supercharts and select the instrument you want to analyse.
2. Choose indicators, metrics and strategies from the upper toolbar.
3. Search for Relative Strength Index or RSI.
4. Select the built-in Relative Strength Index from the Technicals results.
5. Close the search window to return to the chart.

The RSI panel will appear beneath the main price chart. To adjust the indicator, select the gear icon next to its name in the chart legend.

TradingView also has community-created RSI scripts that may use different calculations, signals or display settings. Check how a script works before assuming it will produce the same results as TradingView’s built-in RSI.

Understanding the RSI panel and levels

The RSI line moves between 0 and 100. By default, TradingView displays reference levels at 70, 50 and 30:

• Above 70: Momentum may be overbought or unusually strong.
• Below 30: Momentum may be oversold or unusually weak.
• Above 50: Average gains are stronger than average losses.
• Below 50: Average losses are stronger than average gains.
• Around 50: Momentum is relatively balanced.

The 50 centreline can also provide context about the direction of momentum. RSI remaining mostly above 50 can indicate that upward momentum is dominant, while RSI remaining mostly below 50 can indicate that downward momentum is dominant.

You can customise the reference levels in the indicator settings. For example, some traders use 80 and 20 to focus on more extreme readings or adjust the levels based on how RSI behaves during an established trend.

Using RSI across different timeframes

TradingView allows you to calculate RSI using a different timeframe from the main chart. This can help you compare broader momentum with shorter-term price movements without switching between charts.

To change the RSI timeframe:

1. Open the RSI settings.
2. Go to Inputs.
3. Find the Calculation section.
4. Open the Timeframe menu.
5. Select the timeframe you want RSI to use.

For example, you could display a daily RSI on a one-hour chart. The daily RSI provides broader momentum context while the one-hour chart allows you to examine shorter-term price action.

The Wait for timeframe closes setting determines when a higher-timeframe RSI value is confirmed. When enabled, the value is confirmed only after the higher-timeframe bar closes. When disabled, the RSI updates while that bar is still forming, meaning the displayed value can continue to change until the bar closes.

Using an RSI timeframe below the chart timeframe works differently because multiple lower-timeframe RSI values can occur within a single chart bar. In this case, TradingView displays the last available lower-timeframe value associated with that bar.

Core RSI signals to watch

RSI can produce several types of momentum signals, including overbought and oversold readings, divergences and failure swings. These signals can provide useful context, but they are generally more meaningful when considered alongside price action and the broader market trend.

Overbought and oversold conditions

Wilder identified RSI readings above 70 as overbought and readings below 30 as oversold.

An overbought reading indicates that recent gains have been particularly strong relative to recent losses. It does not necessarily mean that an instrument is overvalued or that its price is about to fall. Similarly, an oversold reading reflects strong recent losses relative to gains, but does not mean that the price has reached a bottom.

This distinction is particularly important during strong trends. RSI can remain above 70 while an uptrend continues or below 30 while a downtrend continues. Reaching these levels can therefore reflect strong momentum rather than signal an immediate reversal.

Rather than relying on an RSI reading alone, traders may look at whether RSI moves back out of the overbought or oversold zone and whether the move is supported by other technical signals, such as changes in price structure, support and resistance levels or divergence.

The 70 and 30 levels are reference points rather than universal thresholds. Their relevance can vary depending on the instrument, timeframe, volatility and prevailing market conditions.

Bullish and bearish divergence

RSI divergence occurs when price and the indicator move in different directions, potentially signalling that the momentum behind a price trend is weakening.

A bullish divergence forms when price records a lower low while RSI forms a higher low. Price is still falling, but the higher RSI low indicates that downward momentum has weakened.

A bearish divergence occurs when price forms a higher high while RSI forms a lower high. Price is still rising, but the lower RSI high indicates that upward momentum has weakened.

Divergence can point to changing momentum, but it does not confirm that a reversal will follow. A trend can continue even after one or more divergences have formed.

When identifying divergence, traders typically compare distinct swing highs or lows rather than minor price fluctuations. Its significance can also depend on where it occurs and what happens to price afterwards.

Andrew Cardwell offered a different perspective on divergence, observing that bullish divergence can occur within downtrends and bearish divergence within uptrends. In these cases, divergence may precede a temporary correction rather than a complete trend reversal, making the broader trend important when interpreting the signal.

Failure swings

Failure swings are patterns formed entirely by movements in RSI, without requiring a comparison between RSI and price.

A bullish failure swing develops when:

1. RSI moves below 30.
2. It recovers above 30.
3. It pulls back but remains above 30.
4. It rises above its previous RSI high.

This suggests that downward momentum may be weakening and that RSI has failed to return to oversold territory.

A bearish failure swing develops in the opposite direction:

1. RSI moves above 70.
2. It falls back below 70.
3. It rebounds but remains below 70.
4. It drops beneath its previous RSI low.

This indicates that upward momentum weakened, RSI failed to return to overbought territory and downward momentum subsequently strengthened.

Like other RSI signals, failure swings do not confirm what price will do next. Their significance depends on the broader trend, price structure and surrounding technical levels.

Using RSI with trend context

The same RSI reading can mean different things depending on whether the market is trending upwards, trending downwards or moving sideways. Looking at RSI within the broader trend can help distinguish sustained momentum from signs that momentum may be weakening.

RSI behaviour in uptrends and downtrends

During an uptrend, RSI may spend more time in the upper half of its range. It can repeatedly move above 70, while pullbacks in the indicator may find support around the 40–50 area.

During a downtrend, RSI may spend more time in the lower half of its range. It can repeatedly fall below 30, while recoveries may struggle around the 50–60 area.

This is another reason why 70 and 30 should not automatically be treated as reversal levels. A move above 70 during an uptrend can reflect strong upward momentum, while a move below 30 during a downtrend can reflect strong downward momentum.

The 50 centreline can also provide additional trend context:

• RSI remaining mostly above 50 can support an upward momentum interpretation.
• RSI remaining mostly below 50 can support a downward momentum interpretation.
• Frequent moves across 50 can indicate weaker directional momentum or range-bound conditions.

These ranges are observations rather than fixed rules. RSI behaviour can vary between instruments, timeframes and market conditions.

Cardwell’s trend confirmations

Andrew Cardwell developed methods for using RSI to assess trend continuation, including patterns known as positive and negative reversals.

A positive reversal occurs when price forms a higher low while RSI forms a lower low. Unlike regular bullish divergence, the pattern typically occurs within an uptrend and can indicate that upward momentum remains intact.

A negative reversal occurs when price forms a lower high while RSI forms a higher high. It typically occurs within a downtrend and can indicate that downward momentum remains intact.

These patterns essentially reverse the relationship seen in traditional RSI divergence. Rather than interpreting every difference between price and RSI as a possible reversal signal, Cardwell used some of these patterns to assess whether an existing trend could continue.

RSI and potential trend reversals

RSI can highlight changes in momentum that may occur around a potential trend reversal, but it cannot confirm a reversal on its own.

For example, an overbought or oversold reading may show that momentum has reached an extreme, while divergence can indicate that momentum is weakening even as price continues in the same direction. Failure swings or changes in the RSI range can provide further evidence that momentum conditions are changing.

Price behaviour remains important when interpreting these signals. For example, bullish divergence near a significant support level may become more meaningful if price subsequently forms a higher low or breaks above a recent swing high. Without a corresponding change in price, divergence can persist while the existing trend continues.

RSI settings and inputs in TradingView

There is no single RSI setting that works best across every market or timeframe. TradingView uses a 14-period RSI based on closing prices by default, but you can adjust its inputs depending on the type of momentum you want to analyse.

RSI length and source

RSI Length determines the number of bars used in the calculation. TradingView uses 14 bars by default.

A shorter length, such as 7 or 9, makes RSI more sensitive to recent price changes. The indicator will move more quickly and reach overbought or oversold levels more frequently, but it may also react more strongly to short-term price fluctuations.

A longer length, such as 21, produces a smoother RSI that reacts more slowly. This can make broader momentum easier to see, but short-term changes will take longer to appear in the indicator.

Source determines which price value is used to calculate RSI. The closing price is the default, but TradingView also allows you to select the open, high, low or combinations of these prices.

Changing the source will change the resulting RSI values, so readings from an alternative source may differ from the standard close-based RSI. When comparing results, it is important to use the same settings consistently.

RSI smoothing and calculation settings

TradingView also allows you to add a moving average to the RSI panel. This does not change the calculation of the RSI itself. Instead, it creates a separate smoothed line based on the RSI values.

Available smoothing options include:

• Simple moving average (SMA)
• SMA with Bollinger Bands
• Exponential moving average (EMA)
• Smoothed moving average or RMA
• Weighted moving average (WMA)
• Volume-weighted moving average (VWMA)
• None

The smoothing length determines how closely the additional line follows RSI. A shorter length responds more quickly, while a longer length creates a smoother, slower-moving line.

Selecting SMA + Bollinger Bands adds upper and lower bands around the RSI’s moving average. The BB StdDev setting controls the number of standard deviations used, with two as the default.

The Calculation settings allow you to calculate RSI using a different timeframe from the main chart. The Wait for timeframe closes option determines whether a higher-timeframe RSI updates while its current bar is forming or only after that bar closes.

Automatic divergence detection

TradingView's standard RSI indicator historically does not include automatic divergence detection. The divergence feature is available in some newer built-in scripts/technical tools, but not universally.

The feature uses predefined rules to identify pivot points and compare movements in price with movements in RSI. As a result, automatically detected divergences may not always match those identified manually and may only appear once the required pivot points have been confirmed.

The setting also needs to be enabled to use TradingView’s built-in Regular Bullish Divergence and Regular Bearish Divergence alert conditions.

Using RSI effectively on TradingView: practical tips and common mistakes

TradingView alerts can help you monitor RSI conditions without watching a chart continuously. When using RSI in your analysis, it is also important to understand how timeframe, indicator settings and other technical tools can affect the signals you see.

Setting up RSI alerts

To create an RSI alert on TradingView:

1. Add the built-in RSI to your chart.
2. Right-click the RSI line or open the Alert manager.
3. Select Add alert or Create alert.
4. Choose the RSI indicator in the Condition menu.
5. Select the required condition, level and trigger direction.
6. Choose how often the alert should trigger.
7. Set its expiry, name, message and notification method.
8. Select Create.

You can create alerts for conditions such as RSI crossing a selected level or TradingView detecting regular bullish or bearish divergence.

RSI alerts depend on the indicator settings and chart timeframe used when they are created. If you later change the RSI length, source, timeframe or other parameters, an existing alert will continue using its original settings. To apply the new parameters, you will need to create a new alert.

You can also choose whether an alert triggers while a bar is forming or after it closes. Waiting for the bar to close can avoid alerts based on temporary intrabar movements, but it also means receiving the alert later.

Common RSI mistakes to avoid

Many problems with RSI come from treating individual readings as trading signals rather than considering the conditions behind them. Common mistakes include:

• Treating 70 and 30 as automatic reversal signals. RSI can remain overbought or oversold while a strong trend continues.
• Ignoring the timeframe. RSI can show very different momentum conditions across short and long timeframes.
• Relying on divergence alone. Divergence indicates a difference between price and momentum, but the existing trend can continue after it appears.
• Overreacting to an unfinished bar. RSI can continue changing until the current price bar closes.
• Assuming faster settings are more accurate. Shorter RSI lengths respond more quickly but are also more sensitive to short-term price fluctuations.
• Relying entirely on automatic divergence detection. TradingView identifies divergence using predefined pivot rules, which may not always match manual analysis.
• Ignoring wider market conditions. RSI reflects price momentum but does not directly account for factors such as market liquidity, which can influence price movements and how RSI signals should be interpreted.

These limitations do not make RSI unreliable, but they affect how its readings should be interpreted.

How to combine RSI with other tools

RSI can provide more context when considered alongside other forms of technical analysis rather than used as the sole basis for a trading decision.

For example, support and resistance can show where an RSI signal is forming within the broader price structure, while moving averages or trend lines can provide context about the prevailing trend. Volume and volatility indicators, such as Average True Range or Bollinger Bands, can provide additional information about the conditions surrounding a price move.

Price action can also help determine whether a change in momentum is being reflected in the market itself. For example, divergence may become more relevant if it occurs near a significant technical level and is followed by a change in price structure.

Using several indicators does not necessarily provide stronger confirmation. Indicators that measure similar aspects of momentum often rely on the same underlying price data and may therefore provide overlapping information.

RSI is ultimately one part of technical analysis. Its signals can help traders assess momentum, but their relevance depends on the trend, timeframe, price action and wider market conditions. RSI should also be considered alongside appropriate risk management, as no setting or signal can guarantee a particular market outcome.