The RSI Lab

The RSI lab is all about the Relative Strength Index which was developed by J. Welles Wilder and published in 1978.  This section takes an in-depth look at the foundations for my RSI work and all the thoughts, studies and applications of this analysis.  RSI is the primary momentum indicator that I follow.  I prefer it because it is the most dynamic momentum indicator I have found.  For me it has some extremely useful applications outside the traditional overbought/oversold momentum analysis.

20110718 IWM RSI chart

Taking RSI to the Next Level

Taking RSI to the next level for buttons

RSI Chart Explanation Video.







Above are links to an educational series on RSI as well as other explanatory posts that give more insight into the many ways I have learned to use the Relative Strength Index over the last decade.  The Nitrous Scan also originated from my RSI work, but has grown to deserve its own section as it has proven to be a scan that provides a consistent flow of ideas in most market environments.  Below you can also find links to other RSI posts I have written on using the Relative Strength Index through the years.  I feel if you take the time to study the RSI in more detail, you will find just how dynamic it really is.  I hope these posts provide value in your studies.

RSI Educational Blog Posts


Hamid Esnaashari

March 4, 2015at 6:36 pm

Very interesting and comprehensive description.
For the spotting positive reversal, does one need to sketch the line between swings ( low or high) or it can be drawn at any closing point in price chart?


    March 4, 2015at 6:45 pm

    Thank you, as far as how what points to use, the close of the candle at the low/high pivot of the RSI at the points where the Positive or Negative Reversal is formed. I do not use the high or low wicks, only closing price of the candle for measurement.


    March 13, 2015at 7:42 am

    Hamid, it doesn’t have to be sketched. I just do that to show the difference in closing levels. But, I do always use closing prices.



July 1, 2015at 6:59 pm

thanks for the article.
is there a way of predicting which positive/negative reversal signals will fail?

Hamid Esnaashari

October 22, 2015at 3:15 pm

Congratulations for your new website.
Regarding PR , Do you consider a consider divergence between RSI and price slope as PR, or RSI has to be lower and price upper to consider it PR.
On the other word if the RSi is slightly up but price is much more higher , can I consider it a PR? and an entry signal on a pull back?
Thanks in advance


    October 23, 2015at 11:16 am

    Thank you Hamid!
    on a Positive reversal, slope does not matter other than to show amplitude. You do need Price to make a higher low on the second trough while RSI makes a lower low. I do not consider it valid if the criteria is not fully met.

Hamid Esna

November 20, 2015at 4:28 pm

Hi Tommy,
Regarding target equation
Target = High + (Ref-X). Do you consider the closing price for all 3 prices in equation ?
Thanks for clarification


    December 13, 2015at 8:42 am

    Hamid, sorry for the delay. Yes I use closing prices for all of them, but I have heard of some using High/Low for the day. I prefer closes.

Artorn Lin

November 22, 2015at 5:34 pm

I am quite confused between the Bearish /Bullish Divergence and the Positive and Negative reversal. Could you kindly explain? Btw, I am just a new trader and needed to learn more.. Thank you very much.


    December 13, 2015at 8:46 am


    Normal Positive divergence is when the indicator makes a higher low trough while price makes a lower low. Bear divergence is the opposite
    Positive reversal is when the indicator makes a lower low trough while price makes a higher low trough. Negative Reversal is the opposite. as show in the charts on the post.


May 27, 2017at 7:03 pm

The terms  positive-negative patterns, patterns with figure-ground reversal, and counterchange patterns are often synonymous, but they can also shed light on the same pattern at different angles and go to the heart of what makes patterns with color reversals so interesting and attractive.

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