The Relative Strength Index (RSI), developed by J. Welles Wilder in 1978, is a bounded momentum oscillator. It compares the magnitude of recent up-closes to the magnitude of recent down-closes over a look-back window (Wilder's default is 14) and rescales the result onto a 0–100 axis.
Conventional reads: above 70 = overbought, below 30 = oversold. In strongly trending markets those thresholds shift (Constance Brown's work argues 40–80 for uptrends and 20–60 for downtrends). RSI is also used to spot divergences — price makes a new high but RSI does not, suggesting weakening momentum.
Wilder used a smoothing scheme equivalent to an EMA with α = 1/N, not the standard EMA α = 2/(N+1). Different platforms use slightly different smoothing, so RSI values can disagree across charting tools.
Formula
RSI = 100 - 100 / (1 + RS), where RS = avg gain / avg loss over the look-back window
Example
Over 14 bars: average gain = 1.2, average loss = 0.6. RS = 2.0, RSI = 100 − 100 / 3 ≈ 66.7 — leaning bullish but not overbought.
How Noon Barbari uses Relative strength index (RSI)
Every concept here is implemented in the platform. Open the relevant docs or tool to see it in action.
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