The Relative Strength Index (RSI) is one of the most widely used momentum oscillators in technical analysis. Developed by J. Welles Wilder, it helps traders identify overbought or oversold conditions in a market, offering insights into potential trend reversals or continuations. For users of TradingView—a powerful, web-based charting platform—adding and customizing the RSI is a straightforward process that can significantly enhance your analytical capabilities.
This guide will walk you through the simple steps to apply the RSI to your charts and tailor its settings to match your trading strategy.
Understanding the RSI Indicator
The RSI calculates the speed and change of price movements, oscillating between zero and 100. Traditionally, readings above 70 indicate an overbought market, suggesting a potential pullback, while readings below 30 signal an oversold market, hinting at a possible upward reversal.
Many traders also watch for center-line crossovers (around the 50 level) to gauge momentum shifts and divergences—where the price makes a new high or low that isn't confirmed by the RSI—as strong signals for potential trend changes.
Step-by-Step: Adding the RSI to Your TradingView Chart
- Open Your Chart: Log in to your TradingView account and open the chart for the asset you want to analyze.
- Access the Indicators Menu: Click on the "Indicators" button at the top of the chart. It is typically labeled "Fx" for easy identification.
- Search for RSI: In the search bar of the dialog box that appears, type "RSI". The Relative Strength Index indicator will be listed under the "Popular" or "Built-in" categories.
- Select the Indicator: Click on the RSI name from the search results. It will automatically be applied to your chart, usually in a separate pane below the main price window.
Customizing RSI Settings for Your Strategy
The default RSI setting is a 14-period average, which is suitable for many traders. However, you can easily adjust its parameters to better fit your trading style and timeframe.
- Open Settings: Hover your cursor over the RSI indicator line in its pane, and either double-click or click the small gear icon (settings) that appears.
Adjust the Inputs Tab:
- Length: This is the number of periods the calculation is based on. A shorter length (e.g., 7) makes the RSI more sensitive and volatile, generating more signals. A longer length (e.g., 21) smooths the oscillator, making it less reactive and providing fewer, but potentially more reliable, signals.
- Source: This defines the price data used in the calculation. The default is typically the "close" price, but you can change it to use the open, high, low, or other price points.
- Modify the Style Tab: Here, you can change the visual appearance of the RSI line—adjust its color, thickness, and line style (e.g., solid, dotted). You can also customize the colors of the overbought and oversold levels and adjust their values if your strategy calls for different thresholds (e.g., 80/20).
- Apply and Save: Click "OK" to apply your changes. You can also save this customized version as a template for future use.
👉 Explore more advanced charting strategies
Practical Tips for Using the RSI Effectively
- Avoid Whipsaws in Ranging Markets: The RSI can generate many false signals in sideways or choppy markets. It is often most effective when used in conjunction with a trend-following indicator or when the overall market trend has been identified.
- Look for Divergence: A powerful signal occurs when the RSI diverges from the price action. For example, if the price makes a new high but the RSI makes a lower high (bearish divergence), it can be a warning that the upward momentum is waning.
- Combine with Other Tools: Don't rely on the RSI alone. Use it as part of a broader toolkit that includes other indicators like moving averages, volume profile, or support and resistance levels to confirm signals.
Frequently Asked Questions
What is the best RSI setting for day trading?
Many day traders prefer a faster RSI, such as a period setting of 9 or 7, to be more responsive to short-term price movements. However, the "best" setting is subjective and should be tested in different market conditions to see what aligns with your individual strategy.
Can the RSI be used for all timeframes?
Yes, the RSI can be applied to any timeframe, from tick charts to monthly charts. Remember that the signals on lower timeframes will be more numerous but also noisier, while signals on higher timeframes are generally stronger but less frequent.
What is the difference between RSI and Stochastic?
Both are momentum oscillators, but they calculate values differently. The RSI measures the velocity of price movements, while the Stochastic compares the closing price to its price range over a specific period. They can often be used together to confirm signals.
How reliable is the RSI indicator?
No indicator is 100% reliable. The RSI is a valuable tool for gauging momentum, but its signals should not be taken in isolation. Its reliability increases when its signals are confirmed by other aspects of technical analysis, such as price action patterns or trend analysis.
What does RSI divergence mean?
Divergence occurs when the price of an asset moves in the opposite direction of the RSI. It is considered a strong signal that the current price trend may be weakening and could be poised for a reversal, making it a key concept for many traders to master.
Should I change the default overbought/oversold levels?
It depends on the asset and market volatility. For strongly trending assets, a level of 80 might be more appropriate for overbought, and 20 for oversold, to avoid exiting a trend too early. Experiment with historical data to find levels that work best for your chosen markets.