What is RSI?
The Relative Strength Index (RSI) is a momentum oscillator from 0 to 100 that compares the size of recent up-moves with recent down-moves, usually over 14 periods.
How it works
J. Welles Wilder introduced it in 1978. It divides the average gain by the average loss over the lookback window and rescales the result to 0 to 100. A reading above 70 is conventionally called overbought and below 30 oversold, and some traders treat 50 as the line between bullish and bearish momentum.
What it can't tell you
In a strong trend RSI can sit above 70 or below 30 for a long time, so an overbought reading is not a sell signal on its own. It also says nothing about how large the next move will be.
How Tickfloor uses it
RSI(14) is one of the ten inputs to Tickfloor's agreement score.
Does it work as a strategy?
Tickfloor backtested 4 rules that use RSI, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use RSI, and a historical diagnostic, not validation under Testing Standard v2.
Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
- RSI Trading Strategy: the full test
- RSI(2) Mean Reversion: the full test
- MACD + RSI Confluence: the full test
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Common questions
What is RSI?
The Relative Strength Index (RSI) is a momentum oscillator from 0 to 100 that compares the size of recent up-moves with recent down-moves, usually over 14 periods.
How does RSI work?
J. Welles Wilder introduced it in 1978. It divides the average gain by the average loss over the lookback window and rescales the result to 0 to 100. A reading above 70 is conventionally called overbought and below 30 oversold, and some traders treat 50 as the line between bullish and bearish momentum.
Does RSI work as a strategy?
Tickfloor backtested 4 rules that use RSI, net of modelled trading costs, against a benchmark of the same assets. None finished ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use RSI, and a historical diagnostic, not validation under Testing Standard v2.
What are the limits of RSI?
In a strong trend RSI can sit above 70 or below 30 for a long time, so an overbought reading is not a sell signal on its own. It also says nothing about how large the next move will be.
How does Tickfloor use RSI?
RSI(14) is one of the ten inputs to Tickfloor's agreement score.