In brief: RSI is a momentum oscillator from 0 to 100 that compares recent gains and losses to show how strongly a price has moved.
What RSI measures
The Relative Strength Index, commonly called RSI, compares the size of recent upward and downward price changes over a selected lookback period. The standard setting uses 14 periods, although traders may use other settings.
RSI is a bounded oscillator: readings move between 0 and 100. Higher readings indicate stronger recent upward momentum, while lower readings indicate stronger recent downward momentum.
Overbought and oversold are context, not commands
Readings above 70 are often described as overbought and readings below 30 as oversold. These labels describe recent momentum, not certainty that a reversal is about to happen.
A strong uptrend can remain above 70 for a long time. Likewise, a falling stock can remain below 30 while the underlying trend continues. Look at support, resistance, volume, and the broader trend before drawing conclusions.
Spotting divergence
Bullish divergence can occur when price makes a lower low while RSI makes a higher low. Bearish divergence is the opposite pattern. Divergence can be a useful prompt for closer research, but it is not a standalone signal.
Signals are stronger when multiple independent indicators tell a consistent story and when the price confirms the move.
A practical RSI workflow
- Identify the time frame and the dominant price trend.
- Note whether RSI is above, below, or near the 50 midpoint.
- Treat 70 and 30 as alert zones, not automatic buy or sell levels.
- Confirm any setup with price action, volume, and fundamental context.
Important: This guide is for general education and research. Market data, estimates, and technical signals can be incomplete or wrong. Nothing on this page is personal investment, tax, or financial advice.