What is the Relative Strength Index (RSI)?

Nov 05, 2020

As you work in TradeSmith Finance, you may notice the RSI.

RSI on chart

What is the RSI?

This stands for Relative Strength Index.

It’s a momentum indicator used in technical analysis that measures the magnitude of recent price changes. It evaluates overbought or oversold conditions in the price of a stock or other asset.

The RSI will range from 0 to 100.

  • An asset is usually considered overbought when the RSI is above 70 and oversold when it is below 30.

The RSI gives you an indication of bullish and bearish price momentum.

Typically, the RSI is most reliable when they conform to the long-term trend.

Since the indicator displays momentum, it can stay overbought or oversold for a long time when an asset has significant momentum in either direction. Therefore, the RSI is most useful in an oscillating market where the asset price is alternating between bullish and bearish movements.