Is RSI 14 the best setting?

RSI 14 is the default and works well for most situations. Shorter periods (7-9) are more sensitive, longer periods (21-25) are smoother.

Can RSI stay overbought for a long time?

Yes! In strong trends, RSI can stay in overbought/oversold territory for extended periods. This is why divergences and trend context matter.

Key Takeaways

Difficulty:Beginner

Reliability:High

Category:momentum

Timeframes:15M, 1H, 4H

Relative Strength Index (RSI)

momentum📊 15M, 1H, 4H, Daily

RSI measures the speed and magnitude of price changes, oscillating between 0-100 to identify overbought and oversold conditions.

Formula

Code

RSI = 100 - (100 / (1 + RS))

RS = Average Gain / Average Loss over period

Detailed Explanation

The Relative Strength Index (RSI) is a momentum oscillator developed by J. Welles Wilder Jr. in 1978. It measures the speed and change of price movements on a scale of 0 to 100.

**Key Levels:** - **Above 70**: Overbought territory - **Below 30**: Oversold territory - **50 Line**: Centerline, indicates trend direction

**Trading Applications:** 1. **Overbought/Oversold**: Trade reversals at extremes 2. **Divergences**: Price vs RSI disagreement signals reversals 3. **Failure Swings**: RSI pattern that can precede price reversals

Parameters

Period

Default: 14

RSI calculation period

Overbought

Default: 70

Overbought threshold

Oversold

Default: 30

Oversold threshold

📈 Bullish Signals

RSI crosses above 30 from oversold, bullish divergence, crosses above 50

📉 Bearish Signals

RSI crosses below 70 from overbought, bearish divergence, crosses below 50

Python Implementation

RSI with overbought/oversold detection

Python

import pandas_ta as ta

df['RSI'] = ta.rsi(df['close'], length=14)

# Overbought/Oversold signals

df['rsi_overbought'] = df['RSI'] > 70

df['rsi_oversold'] = df['RSI'] < 30

TradingView Pine Script

Try on TradingView

JavaScript

//@version=5

indicator("RSI", overlay=false)

rsi = ta.rsi(close, 14)

plot(rsi, "RSI", color=color.purple)

hline(70, "Overbought", color=color.red)

hline(30, "Oversold", color=color.green)

hline(50, "Midline", color=color.gray)

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MT5 MQL5 Code

C++

int rsi_handle = iRSI(_Symbol, _Period, 14, PRICE_CLOSE);

double rsi[];

CopyBuffer(rsi_handle, 0, 0, 3, rsi);

Python Libraries

pandas-ta

Technical analysis

pip install pandas-ta

Common Mistakes

✗Selling just because RSI is overbought in strong uptrend

✗Ignoring divergences in favor of raw values

✗Not adjusting period for different timeframes

Confirmation Signals

Price action at support/resistance

Volume spike

Candlestick patterns

Best For

Overbought/oversold conditionsDivergence tradingMomentum confirmation

💡 Pro Tips

•In strong trends, RSI can stay overbought/oversold for extended periods
•Divergence between RSI and price is a powerful reversal signal
•Default period is 14, but adjust based on trading style

Last updated: December 29, 2024

Educational Disclaimer

This content is for educational purposes only and does not constitute financial or investment advice. Trading involves significant risk and you may lose your capital. Always consult a licensed financial advisor before making investment decisions.

Learn More

Investopedia - Technical Indicators— Financial Education BabyPips - Technical Indicators— Trading School MetaTrader 5 Docs— Official Documentation

Frequently Asked Questions

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