RSI (Relative Strength Index)
What it shows
RSI (Relative Strength Index, 14) is a momentum oscillator on a 0–100 scale that measures how fast and how strongly price has risen or fallen over the recent period. It helps judge whether the market is overbought, oversold or balanced.
How to read it
Read RSI as a measure of extremes, not an entry signal: extremely low values historically accompanied bottoms, extremely high ones local tops. The strongest picture forms when RSI agrees with the other short-term indicators.
Parameters
- RSI reading (0–100)
- The higher it is, the stronger the recent upward momentum; the lower, the stronger the downward pressure.
- Positive reading: Below 30 (oversold): historically a zone of exhausted selling and accumulation.
- Negative reading: Above 70 (overbought): historically an overheated area with elevated correction risk.
- Neutral reading: Range 30–70: momentum in balance, no extreme either way.
Example
RSI drops to 26 after a long sell-off, which is an oversold zone that historically accompanied exhausted selling and accumulation phases. When it rebounds above 70 in euphoria, correction risk historically rose; a reading near 50 is balance with no side in control.