RSI (Relative Strength Index)
RSI is a momentum oscillator from 0-100 that flags overbought and oversold conditions, with divergence as its strongest signal.
RSI is a 0-100 momentum oscillator flagging overbought above 70 and oversold below 30. In strong trends it can stay extreme for long stretches, so divergence matters more than the levels.
The Relative Strength Index (RSI) is a momentum oscillator developed by J. Welles Wilder that measures the speed and size of recent price moves on a scale of 0 to 100. Readings above 70 are considered overbought and below 30 oversold, though in strong trends the oscillator can stay extreme for long stretches. RSI divergence - price making a new high while RSI does not - is one of the most reliable reversal warnings in technical analysis.
How It Works
- Compares average gains to average losses over a period, typically 14
- Overbought above 70, oversold below 30
- Divergence between price and RSI warns of fading momentum
Trading Tips
In uptrends, buy RSI pullbacks to 40-50; in downtrends, sell rallies to 60-70
Divergence in overbought/oversold territory is the strongest signal
RSI works best in ranges; it lies in strong trends
Related Terms
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