RSI: how to use and code the Relative Strength Index.

The RSI is probably the first indicator every trader learns — and also one of the most misused. Most people memorize "70 sells, 30 buys" and stop there, which leads to losing money in strong trends. This guide goes further: it explains what the RSI actually measures, where it shines, where it fails, and hands you the code to plug into a bot.

01What the RSI actually measures

RSI stands for Relative Strength Index — created by J. Welles Wilder in 1978. It is a momentum oscillator: it ranges from 0 to 100 and measures the speed and magnitude of recent price moves. In plain language: it compares the size of recent gains with the size of recent losses.

• RSI above 70: overbought — price rose fast and may be "stretched".
• RSI below 30: oversold — price fell fast and may be "stretched" to the downside.
• RSI at 50: balance between buying and selling strength.

02The formula (to understand, not to memorize)

You do not need to compute it by hand — every platform does that — but understanding the formula stops you from using it wrong:

RSI = 100 − [ 100 / (1 + RS) ]

onde RS = média dos ganhos / média das perdas (no período)

The default period is 14. The practical consequence of the formula: when there are only gains in the period, RS tends to infinity and the RSI goes to 100; when there are only losses, the RSI goes to 0. That is why it "saturates" — and that is exactly where the trap we will see next lives.

03The 3 real uses (beyond the obvious)

1. Overbought / oversold

The classic use. But careful: it works well in a ranging market; in a strong trend the RSI stays "glued" to the extreme (above 70 for days in a strong rally) and the "sell" signal has you trading against the trend — an expensive mistake.

2. Divergences (the most valuable use)

This is where the RSI's gold is. Divergence happens when price and the RSI disagree:

• Bearish divergence: price makes a higher high, but the RSI makes a lower high → the up move is losing strength, possible reversal to the downside.
• Bullish divergence: price makes a lower low, but the RSI makes a higher low → the fall is weakening, possible reversal to the upside.

3. The 50 line as a trend filter

An underrated use: an RSI consistently above 50 confirms an uptrend; below 50, a downtrend. Great as a filter for other strategies — only buy with the RSI above 50, for example.

04Coding the RSI

Here is the ready-made code for the two most used platforms. Note that both Pine and Python have the RSI in their libraries — you rarely compute it by hand, but I show the manual calculation in Python so you understand what goes on inside.

//@version=5
indicator("RSI com Zonas")

periodo = input.int(14, "Período")
rsi = ta.rsi(close, periodo)

plot(rsi, "RSI", color=color.blue)
hline(70, "Sobrecompra", color=color.red)
hline(30, "Sobrevenda", color=color.green)
hline(50, "Meio", color=color.gray)

// crossover alert
if ta.crossunder(rsi, 30)
    alert("RSI entrou em sobrevenda")

import pandas as pd

def calcular_rsi(precos: pd.Series, periodo=14) -> pd.Series:
    delta = precos.diff()
    ganho = delta.clip(lower=0)
    perda = -delta.clip(upper=0)
    # Wilder's exponential moving average
    media_ganho = ganho.ewm(alpha=1/periodo, adjust=False).mean()
    media_perda = perda.ewm(alpha=1/periodo, adjust=False).mean()
    rs = media_ganho / media_perda
    return 100 - (100 / (1 + rs))

# uso
df["rsi"] = calcular_rsi(df["close"])
if df["rsi"].iloc[-1] < 30:
    print("Sobrevenda — avaliar compra com confirmação")

05Which period to use

The default of 14 is a good balance, but you can adjust it to your style:

• Short periods (7-9): a more sensitive RSI, more signals, more noise. For scalping and fast day trading.
• Period 14 (default): balance. It works in most cases.
• Long periods (21+): a smoother RSI, fewer signals, more reliable. For swing trading.

06Frequently asked questions