A momentum oscillator that compares the magnitude of recent gains and losses on a scale from zero to one hundred.
How it works
RSI converts average recent gains and losses into an oscillator between 0 and 100. A common calculation uses 14 periods, but the period and smoothing method must be stated.
Example
A reading above 70 is often labelled overbought, yet a strong trend can remain above that level for an extended period.
Limitations
Thresholds are conventions, not automatic trade signals. RSI can diverge from price or stay extreme while price continues in the same direction.
Evidence LedgerHow this insight was built
Human reviewedThesis being tested
This definition explains Relative Strength Index (RSI) accurately, with its practical use and material limitations.
Key assumptions
- The named calculation or convention is stated where definitions vary.
- The example is illustrative and not a forecast or recommendation.
What could invalidate the view
- A different market, instrument, jurisdiction, or methodology may use the term differently.
- The cited authority may revise its guidance or terminology.
- Editorial ownership
- Market Master · reviewed
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