RSI
The share of recent movement that was upward — and nothing about what comes next.
Compute an RSI reading by hand from a column of closes, and say in plain words what it measures: the share of the recent close-to-close movement that was upward, over a named window. Read "overbought" and "oversold" as the conventions they are, explain why RSI can sit above 70 for a whole advance, describe a divergence as a record of how a push was made rather than a forecast, and recognise the stochastic RSI as an indicator of an indicator.
5 chapters · 6 quiz questions · 11 terms · included with a plan
Otus, on this module
Almost everybody who uses RSI learned it as a rule — above 70 sell, below 30 buy — and almost nobody who uses it could compute one. That is backwards. RSI is one division on a column of closes. Do the division once by hand and the rule falls apart on its own, which is exactly the point: you should not be carrying a rule you cannot check.
The chapters
Each module ends with you doing what it taught — a written answer Otus reads, and a quiz.
- 01 · Read
What RSI actually averages
Gains, losses, a window, one ratio. Worked by hand from seven closes.
- 02 · Read
70 and 30 are a convention
What "overbought" means in arithmetic, and why a trend can live above 70.
- 03 · Read
Divergence, and an indicator of an indicator
A higher high with a lower reading, and what the stochastic RSI rescales.
- 04 · Watch
Watch: RSI
One minute, then the step ticks itself.
- 05 · Write
In your own words
Two or three sentences. Otus reads them.
- 06 · Quiz
Six questions
A wrong answer still pays. It costs the combo, not the XP.
11 terms this module defines
The same definitions Otus uses in the lessons. All of them are in the trading glossary.
- RSI
- Relative Strength Index: the share of recent close-to-close movement that was upward, on a scale of 0 to 100, over a window that is fourteen bars by default. Built from closes only.
- Average gain and average loss
- The two averages RSI is made of: the mean size of the rises and of the falls between consecutive closes over the window, carried forward with Wilder's smoothing. RSI is the gain average's share of their sum.
- Lookback window
- How many bars an indicator averages. A short window makes every close count for more and the line jumpier; a long one makes it smoother and slower. A reading means nothing without it.
- Wilder's smoothing
- Carrying an average forward by blending in each new value with a weight of 1 in n, instead of recomputing from scratch. Used by RSI and ATR; old values fade rather than drop out.
- Overbought and oversold
- Labels for RSI above 70 and below 30. In arithmetic, above 70 means recent rises outweighed falls by more than two to one. A description of the past, not a verdict on price.
- The 70/30 convention
- Wilder's choice of where to draw the lines. Some traders use 80/20 or change them by instrument. A convention can be useful without being a property of the market.
- Oscillator
- An indicator that moves inside a fixed range, like RSI from 0 to 100. Its bounds are made by the formula, not by the market, so "near the top" says nothing about price being high.
- RSI divergence
- Price makes a higher high while RSI makes a lower one, or the mirror at lows. It records that the latest push was more two-sided than the one before. It does not date a reversal.
- Choosing the swing points
- Every divergence compares two specific highs or lows. Change which ones and it can appear or vanish, so a divergence is only a claim once both points are named.
- Stochastic RSI
- Where the latest RSI reading sits between the lowest and highest RSI of the window, from 0 to 1. An indicator of an indicator: faster, noisier, and built from the same closes.
- Indicator lag
- An indicator can only change when a new bar changes its inputs, and each bar is a small fraction of the window. It describes the recent past, always a little after the fact.
Finishing it pays 150 XP and 3 keys on the game board, on top of what each chapter earns. XP measures what you learned — never what you earned. How levels work.
Education only. Nothing here is a recommendation to buy or sell anything; the school teaches reading charts, never predictions.
Start with lesson one.
The first modules, Otus as your tutor and the game board are free. No card needed.