What is RSI (Relative Strength Index)?

A 0-100 momentum oscillator comparing recent gains to losses — most valuable for divergence, not for its 70/30 lines.

The Relative Strength Index (RSI) is a momentum oscillator that compares the size of recent gains to recent losses over a lookback period (traditionally 14) and plots the result on a scale of 0 to 100. Readings above 70 are conventionally labelled overbought and readings below 30 oversold. The RSI condenses momentum into a single line: when it rises, recent closes have been dominated by gains; when it falls, recent closes have been dominated by losses.

The textbook use — sell above 70, buy below 30 — is also the most dangerous, because in a strong trend the RSI can stay pinned in extreme territory for weeks while the move continues; overbought is not a sell signal, it is a description of strength. The more professional application is divergence: when price makes a new high but the RSI makes a lower high, momentum is no longer confirming the move, which often precedes a pullback or reversal. Even then, RSI readings are supporting evidence to be weighed alongside structure and liquidity, never a standalone trigger for risking money.