Weekly RSI vs Daily RSI

Weekly RSI vs Daily RSI – What Is Best for Trading Strategies?

Weekly RSI vs daily RSI – what is best? This is a bit like comparing apples to oranges. It might be the same indicator, but RSI can deliver substantially different risk and reward payoffs in different time frames. Risk and reward are matters you can only answer yourself through backtesting. If you are a swing trader

Which time frame is best in trading? By default, most traders use daily bars. Is that just a habit or is there a logical reason behind it? Let’s do some backtests and find out what might be best for you.

Let’s test to find out the main differences between the two time frames: weekly RSI or daily RSI? (We didn’t test monthly time frames in this article.)

What is the Relative Strength Index (RSI) indicator?

Backtest Comparison Between Weekly & Daily RSI

First, we need to explain what the RSI indicator is. We have covered how the RSI indicator works in a previous article and we recommend having a look at that one if you are unsure what the Relative Strength Index is.

Put shortly, the RSI oscillates between 0 and 100 by summarizing the magnitude of both gains and losses over a period of n days. Low values indicate an oversold position while high values might be an overbought condition.

Here is an example of how the RSI oscillates (in the lower pane):

Weekly RSI vs Daily RSI
The RSI indicator oscillates between 0 and 100.

Weekly RSI vs daily RSI – which market?

What does weekly RSI mean? What does daily RSI mean?

To find out the main differences we need to perform backtests.

We only want to test on stocks and we use the S&P 500 as a proxy (SPY). The test period is from the ETFs inception, 1993, until today.

Weekly vs daily RSI – we optimize and backtest

Optimization in trading is a handy tool. To find out what is best, weekly RSI vs daily RSI, we do the following backtest and optimization (we are not looking at divergence):

  • The lookback period is from 2 to 7 days – RSI(n-days) – with one-day intervals.
  • The entry-level is when the RSI (n-days) crosses below the entry-level. The entry is set at a minimum of 10 and a maximum of 35 with 5 as intervals.
  • The exit level is when the RSI (n-days) crosses above the exit level. The exit is set at a minimum of 65 and a maximum of 90 with 5 as intervals.

All trades are done at the close of the same day as the signal.

Weekly vs daily RSI – the results

Let’s first test by using daily bars. The optimization returns the following results for those simulations with a profit factor of 3.5 and less (those with a higher profit factor have very few trades):

Weekly vs daily RSI strategy

The first column shows the number of days and the second and third the entry and exit levels. We can from the table that the best results are more frequent around 3-5 days.

This is the results of the same optimization by using weekly bars (only profit factors below 5 are considered):

Weekly vs daily RSI backtest

Day trading with daily bars

Before we end the article, we give you a link to an article where we argue you could potentially day trade better by using daily bars instead of intraday bars. We bring this up because it shows that you don’t have to limit the timeframe to the type of trading you are doing.

It might pay off to try different setting and settings.

Also, if you are a swing trader, you might become better by using several different timeframes (as you are better off trading different assets – stocks, bitcoin, crypto, gold, commodities, etc.).

Conclusion: weekly RSI vs daily RSI (What RSI period is the best?)

There are many differences between weekly and daily bars when you use RSI, but it’s tough or impossible to conclude what is best of weekly or daily RSI. Trading is always a tradeoff between risk and reward. At the end of the day, that is a question you need to find out yourself. It’s a little bit like comparing apples to oranges even though it’s the same indicator.

We end the article by summing up the main differences between weekly RSI and daily RSI:

  • You can expect a bigger max drawdown on weekly bars
  • There are substantially fewer trades on weekly bars
  • You can expect a lower CAGR on weekly bars because you are more likely to miss some of the best days

The problem of missing just a few of the best days is explained in these two articles:


Which market is considered in the weekly vs daily RSI comparison?

The comparison is conducted using stocks, specifically the S&P 500, with the ETF SPY serving as a proxy. The test period spans from the ETF’s inception in 1993 until the present.

What are the results of the weekly vs daily RSI optimization for day trading with daily bars?

The results show that the best trading results are often observed around 3-5 days when using daily bars for day trading. The optimization is based on profit factors, with a focus on values below 3.5.

What are the main differences between weekly RSI and daily RSI?

The article summarizes the main differences, highlighting points such as the likelihood of a bigger max drawdown on weekly bars, substantially fewer trades on weekly bars, and a potentially lower Compound Annual Growth Rate (CAGR) on weekly bars.

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