Data Analytic Investments
OscillatorsBeginnerRSI Thermometer

RSI

Relative Strength Index

Measures the speed and magnitude of recent price changes to identify overbought and oversold conditions.

1H, 4H, Daily
Crypto, Forex, Equities, Commodities
Pine Script v5

What is it?

Developed by J. Welles Wilder Jr. in 1978, the RSI is a momentum oscillator that measures the ratio of average gains to average losses over a lookback period (default 14). The formula: RSI = 100 − (100 / (1 + RS)), where RS = average gain / average loss. The result oscillates between 0 and 100. Readings above 70 are traditionally 'overbought' (price may be due for a pullback); readings below 30 are 'oversold' (price may be due for a bounce). In strong trends, RSI can remain in extreme territory for extended periods — a fact that trips up many beginners.

When to use it

  • Spotting potential reversal zones in ranging markets — RSI above 70 or below 30 is most reliable when price is not in a strong directional trend.
  • Divergence trading: when price makes a new high but RSI makes a lower high (bearish divergence), or price makes a new low but RSI makes a higher low (bullish divergence).
  • Trend confirmation: in a strong uptrend, RSI tends to stay between 40–80; in a downtrend, between 20–60. Use these 'trend bands' instead of the classic 30/70 levels.
  • Combining with support/resistance: an RSI bounce from 30 that coincides with a key price support level is a higher-probability long setup.
  • Failure swings: an RSI peak that fails to reach its prior high, then breaks below the prior RSI trough, is a standalone sell signal independent of price action.

Common pitfalls

  • The 70/30 levels are not universal. In a strong bull market, RSI rarely touches 30 — using it as a buy trigger means missing the entire move. Adjust levels to 80/40 in uptrends.
  • RSI divergence can persist for many candles before price reacts. It is a warning, not a trigger — always wait for a price-action confirmation before entering.
  • The default 14-period setting smooths out a lot of signal. Shorter periods (7–9) are more sensitive but noisier; longer periods (21–25) are smoother but lag more.
  • RSI is calculated on closing prices only. Wicks and intraday volatility are invisible to it — a candle that wicked far below support and closed near the open will show a much higher RSI than the wick suggests.
  • Crypto markets run 24/7 with no session close. The 14-period RSI on a daily chart covers 14 calendar days; on a 4H chart it covers only 56 hours. Be explicit about what timeframe you are reading.

Indicator Rider — RSI Thermometer

The RSI Thermometer fills blue in oversold territory, green in neutral, and pulses red when overbought — with the zone label flashing at extremes.

Free code template

Paste directly into TradingView Pine Editor → Add to chart.

Pine Script v5
/indicator("RSI — DAI Template", shorttitle="DAI RSI", overlay=false)

// ── Inputs ──────────────────────────────────────────────────────────────────
rsiLen    = input.int(14,  "RSI Length",      minval=2)
obLevel   = input.int(70,  "Overbought Level", minval=50, maxval=100)
osLevel   = input.int(30,  "Oversold Level",   minval=0,  maxval=50)
src       = input.source(close, "Source")

// ── Calculation ─────────────────────────────────────────────────────────────
rsiVal = ta.rsi(src, rsiLen)

// ── Colours ─────────────────────────────────────────────────────────────────
rsiColor = rsiVal >= obLevel ? #ef4444 :
           rsiVal <= osLevel ? #3b82f6 : #22c55e

// ── Plot ────────────────────────────────────────────────────────────────────
plot(rsiVal, "RSI", color=rsiColor, linewidth=2)
hline(obLevel, "Overbought", color=color.new(#ef4444, 40), linestyle=hline.style_dashed)
hline(50,      "Midline",    color=color.new(#94a3b8, 60), linestyle=hline.style_dotted)
hline(osLevel, "Oversold",   color=color.new(#3b82f6, 40), linestyle=hline.style_dashed)
bgcolor(rsiVal >= obLevel ? color.new(#ef4444, 92) : rsiVal <= osLevel ? color.new(#3b82f6, 92) : na)

// ── Divergence Detection (basic) ────────────────────────────────────────────
bullDiv = rsiVal[2] < osLevel and rsiVal[2] < rsiVal[4] and close[2] < close[4] and rsiVal > rsiVal[2]
bearDiv = rsiVal[2] > obLevel and rsiVal[2] > rsiVal[4] and close[2] > close[4] and rsiVal < rsiVal[2]
plotshape(bullDiv, "Bull Divergence", shape.labelup,   location.bottom, #22c55e, text="DIV↑", size=size.small)
plotshape(bearDiv, "Bear Divergence", shape.labeldown, location.top,    #ef4444, text="DIV↓", size=size.small)

alertcondition(ta.crossunder(rsiVal, obLevel), "RSI Leaving Overbought", "RSI dropped below " + str.tostring(obLevel))
alertcondition(ta.crossover(rsiVal,  osLevel), "RSI Leaving Oversold",   "RSI rose above "   + str.tostring(osLevel))
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