14-Day RSI - Definition, Formula & Calculator

What Is 14-Day RSI?

The 14-Day RSI, short for 14-day Relative Strength Index, is a momentum indicator that measures the speed and magnitude of a stock’s recent price changes over the past 14 trading periods. Developed by J. Welles Wilder Jr., RSI is displayed on a scale from 0 to 100 and is widely used by traders and investors to gauge whether a security may be overbought, oversold or simply moving with strong momentum.[^1]^2

At a basic level, the indicator compares a stock’s average gains with its average losses over the lookback period. When recent gains have been much larger than recent losses, RSI rises. When recent losses dominate, RSI falls. Because of that design, the 14-day setting has become the standard default version of RSI in most charting platforms and technical analysis workflows.[^1]^3

Investors often use 14-Day RSI as a quick way to assess short-term market sentiment. Traditionally, readings above 70 are interpreted as overbought, while readings below 30 are interpreted as oversold. That said, RSI is not a valuation metric and does not tell you whether a business is fundamentally cheap or expensive. Instead, it is a price-based momentum tool that can help identify stretched conditions, trend strength and possible reversal points.

The core intuition is straightforward: if a stock has been rising persistently over the last 14 sessions, its RSI will tend to move higher; if it has been falling persistently, its RSI will tend to move lower. In that sense, RSI is less about absolute price level and more about the balance of recent buying and selling pressure.

The standard formula can be summarized as:

where RS is the ratio of average gain to average loss over the selected period.

How Is 14-Day RSI Calculated?

The 14-Day RSI is calculated using a stock’s price changes over the last 14 trading periods. The classic Wilder formula begins by separating positive price changes from negative price changes.

First, calculate each day’s change in closing price:

Then define gains and losses:

Next, compute the average gain and average loss over 14 periods. In Wilder’s original method, the first calculation uses a simple average, and later values are smoothed using a modified moving average.[^1]^2

Then calculate relative strength:

Finally:

This can also be written in the form historically used by GuruFocus:

A few practical notes matter:

• The average loss is treated as a positive number in the formula.
• If average loss is very small, RSI can move close to 100.
• If average gain is very small, RSI can move close to 0.
• The standard “14-Day RSI” on GuruFocus refers to the 14-period version of the Relative Strength Index.

Because RSI is based entirely on price movement, it reacts faster than many fundamental metrics. That makes it useful for short-term analysis, but also more sensitive to market noise.

14-Day RSI Trend Over Time

Looking at 14-Day RSI over time is often more informative than looking at a single reading in isolation. A stock that repeatedly reaches RSI levels above 70 during rallies may be showing persistent bullish momentum, while a stock that struggles to get above 60 may be in a weaker trend.

Trend context matters. In strong uptrends, RSI often spends more time in the 40 to 80 range. In strong downtrends, it may spend more time in the 20 to 60 range. For that reason, investors often study RSI behavior across multiple swings rather than treating every move above 70 or below 30 as an automatic trading signal.[^2]^4

What Does 14-Day RSI Tell You?

14-Day RSI tells you how strong recent price momentum has been relative to recent declines. It is most commonly used in four ways.

First, it can help identify overbought and oversold conditions. A reading above 70 suggests the stock has risen strongly and may be stretched in the short term. A reading below 30 suggests the stock has fallen sharply and may be due for a bounce. These are guidelines, not hard rules.

Second, it can help assess trend strength. A stock whose RSI remains elevated without collapsing may be in a healthy uptrend. Likewise, persistently weak RSI readings can confirm downside momentum.

Third, investors use RSI to look for divergences. A bearish divergence occurs when price makes a new high but RSI fails to make a new high. A bullish divergence occurs when price makes a new low but RSI does not. These patterns can sometimes hint at weakening momentum before price reverses.[^2]^5

Fourth, RSI can be used for signal confirmation. Some traders watch for RSI crossing back above 30 as a bullish sign after an oversold condition, or crossing back below 70 as a bearish sign after an overbought condition. GuruFocus’s older glossary also notes this common interpretation: a move back above 30 is often viewed as bullish, while a move back below 70 can be viewed as bearish.

Still, RSI should be interpreted in context. A stock can remain overbought for a long time during a strong rally, and it can remain oversold during a prolonged sell-off. That is why RSI is generally more useful as a momentum and timing aid than as a standalone buy or sell signal.

Limitations of 14-Day RSI

Like any technical indicator, 14-Day RSI has important limitations.

First, it is a price-based indicator, not a fundamental one. RSI says nothing about Revenue growth, margins, valuation, balance sheet strength or intrinsic value. A stock can have a low RSI and still be fundamentally overvalued, or a high RSI and still be fundamentally attractive.

Second, RSI can produce false signals in strong trends. One of the most common mistakes is assuming that an RSI above 70 means a stock must fall immediately. In reality, strong momentum stocks can stay overbought for extended periods. The same is true on the downside for oversold readings.

Third, the indicator is sensitive to the chosen lookback period. A 14-day RSI is standard, but shorter versions such as 5-day RSI or 9-day RSI react faster and generate more signals, while longer versions are smoother and slower. Different settings can lead to different conclusions.

Fourth, RSI may be less reliable in sideways, volatile or news-driven markets, where short-term price swings can distort momentum readings. Sudden earnings reactions, macro headlines or market-wide shocks can push RSI to extremes without creating a durable trend.

Fifth, divergence signals are useful in theory but not always timely in practice. A divergence can appear well before price actually reverses, and sometimes no reversal follows at all.

For these reasons, 14-Day RSI is usually best used alongside trendlines, moving averages, support and resistance levels, volume analysis and, when relevant, fundamental research.

Real-World Example

A good way to understand 14-Day RSI is to compare a strong momentum stock with a more defensive, range-bound stock.

Consider a fast-moving technology stock such as NVIDIA (NVDA). During sharp rallies, NVIDIA’s 14-Day RSI can rise above 70 and remain elevated as buyers continue to push the stock higher. In that case, an overbought reading does not necessarily mean the rally is over. It may simply reflect unusually strong momentum.

By contrast, a mature consumer staples or defensive retailer may show a more moderate RSI profile, with readings oscillating around the middle of the range more often. In those cases, moves toward 70 or 30 may carry more short-term mean-reversion value because the stock is less prone to sustained momentum bursts.

That contrast highlights an important point: RSI should be interpreted relative to the stock’s own trading behavior, not just by applying fixed thresholds mechanically. A high-Beta growth stock and a low-volatility defensive stock can produce very different RSI patterns even when both are behaving normally for their respective profiles.

FAQs

What is a good 14-Day RSI?

• There is no universally “good” RSI level. Traditionally, readings above 70 are considered overbought and readings below 30 are considered oversold. In practice, the most useful interpretation depends on the stock’s trend, volatility and historical trading pattern.

What is the difference between 14-Day RSI and related metrics?

• 14-Day RSI is a momentum oscillator based on recent gains and losses over 14 periods. It differs from moving averages, which smooth price over time, and from stochastic oscillators, which compare price to its recent range. It also differs from shorter RSI measures such as 5-Day RSI or 9-Day RSI, which react more quickly to price changes but can be noisier.

Can 14-Day RSI be negative?

• No. RSI ranges from 0 to 100 by construction. It cannot be negative.

How should investors use 14-Day RSI?

• Investors typically use 14-Day RSI as a short-term momentum tool, not as a standalone investment thesis. It can help identify stretched conditions, confirm trend strength or flag possible reversals, but it is most effective when combined with price structure, volume, broader market context and fundamental analysis.

Summary

14-Day RSI is one of the most widely used momentum indicators in technical analysis because it offers a simple way to measure the balance between recent gains and losses. Its 0-to-100 scale makes it easy to interpret, and its standard 14-period setting gives investors a practical view of short-term momentum.

Used well, RSI can help investors spot overbought or oversold conditions, evaluate trend strength and identify possible turning points. Used poorly, it can encourage premature calls for reversals in stocks that are simply trending strongly. That is why the best use of 14-Day RSI is as one tool within a broader analytical framework rather than as a standalone signal.

Sources

1. J. Welles Wilder Jr., New Concepts in Technical Trading Systems (1978), Trend Research.
2. Investopedia, “Relative Strength Index (RSI): Formula, Calculation, and Uses” — https://www.investopedia.com/terms/r/rsi.asp
3. Fidelity, “Relative Strength Index (RSI)” — https://www.fidelity.com/learning-center/trading-investing/technical-analysis/technical-indicator-guide/RSI
4. Schwab, “Relative Strength Index (RSI)” — https://www.schwab.com/learn/story/identifying-trend-reversals-with-rsi
5. CFI, “Relative Strength Index (RSI)” — https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/relative-strength-index-rsi/