RSI (Relative Strength Index) is a momentum oscillator that compares the size of recent gains to recent losses, producing a value between 0 and 100. It is usually calculated over 14 periods. High readings mean gains have dominated recently; low readings mean losses have.

Overbought, oversold, and the important caveat

By convention, an RSI above 70 is called overbought and below 30 oversold. But these are not automatic sell or buy signals. In a strong trend, RSI can stay overbought for a long time while the price keeps climbing, so acting mechanically on the levels often means fighting the trend. Many traders instead watch for divergence, where price makes a new high but RSI does not, as a sign momentum is fading. RSI is a lens on momentum, not a prediction.

  • RSI > 70 — recent gains dominate (overbought); can persist in an uptrend.
  • RSI < 30 — recent losses dominate (oversold); can persist in a downtrend.
  • Divergence — price and RSI disagreeing, a hint that momentum is weakening.