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RSI: The Ultimate Guide to Using Relative Strength Index for Effective Stock Selection in 2026

📅 Translated: 2026-05-25 · Original (Vietnamese): 🇻🇳 Read in Vietnamese
🤖 This article was automatically translated from Vietnamese using Vnstock AI. For the most accurate version, refer to the original Vietnamese article.

🔍 What is RSI? A Simple Definition

RSI (Relative Strength Index) is a momentum oscillator that measures the speed and magnitude of price changes. Developed by J. Welles Wilder Jr. in 1978, it remains one of the most popular indicators worldwide.

RSI values fluctuate between 0-100:

RSI Formula:

RSI = 100 - (100 / (1 + RS))
Where: RS = Avg Gain (14 periods) / Avg Loss (14 periods)

The default parameter of 14 periods is recommended by Wilder and is the industry standard, so there's no need to adjust it.

⚠️ Common Mistake: "RSI 70 means sell, RSI 30 means buy"

This is a critical mistake that 90% of beginners make. In a strong uptrend, RSI can remain above 70 for several weeks, and if you sell based on this simple rule, you'll miss out on significant profits.

Example: HPG 2024: RSI exceeded 70 on February 20 at a price of 28.5K. If you sold immediately, you would have missed the subsequent increase to 38K (+33%) over the next 6 weeks. RSI remained in the 75-85 range during that period.

Correct Rule:

🎯 5 Effective Ways to Use RSI in Trading

1. RSI + Confirmed Trend (Safest Approach)

Buy when RSI crosses above 50 from below, and the price is above MA50, which is sloping upward. This is the "Trend Follower" setup by Stan Weinstein.

2. RSI Divergence — 1-2 Weeks Ahead of Price

Bullish Divergence: Price creates a lower low, but RSI creates a higher low, indicating a potential trend reversal.

Bearish Divergence: Price creates a higher high, but RSI creates a lower high, warning of a potential correction.

Example: VCB in August 2024, price reached 95.5K, but RSI was lower than the previous peak, prompting a sell signal that avoided a 15% decline.

3. RSI 50 as a "Boundary"

Bull market: RSI oscillates between 40-80, rarely falling below 40. Bear market: RSI oscillates between 20-60, rarely exceeding 60. Observe RSI behavior around the 50 level to determine the market regime.

4. RSI Failure Swing (Wilder's Original)

  1. RSI enters the overbought/oversold region
  2. RSI retreats from that region
  3. RSI tests the region again but fails to penetrate it
  4. RSI breaks the previous swing high/low, indicating a strong reversal signal

5. Multi-Timeframe RSI

Only enter trades when RSI is aligned across Daily, Weekly, and Monthly timeframes. This setup is rare (~1-2 times per year per stock) but has a high win rate > 75%.

📊 Example: HPG 2024-2025

During the period from June 2024 to April 2025, HPG (Hòa Phát Group) exhibited the following:

A trader using RSI systematically captured 3 waves of growth/decline over 11 months, earning a total return of ~85% compared to a buy-and-hold return of ~58%.

🚀 Applying RSI on Vnstock.io.vn

Vnstock provides RSI real-time data for 456 VN stocks and 7000 US stocks:

// Example RSI Strategy (AFL)
Buy = RSI(14) < 30 AND Cross(RSI(14), 30);
Sell = RSI(14) > 70 AND Cross(70, RSI(14));

Backtesting on VN30 over 5 years takes only 0.3 seconds.

✅ Conclusion — RSI is Just the Beginning

RSI is an important but not independent indicator. To achieve high win rates, combine RSI with:

This is the composite scoring that Vnstock has prepared for you — a total score of 19 indicators + Multi-factor Z-score, ranking stocks into strong_buy/buy/hold/sell tiers for 456 VN stocks.

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