RSI (Relative Strength Index)
An indicator that measures the speed and magnitude of price changes on a 0 to 100 scale, helping to identify overbought and oversold zones.
The RSI (Relative Strength Index) is one of the most popular technical indicators. Created by J. Welles Wilder, it measures the strength of a move by comparing the average of gains with the average of losses over a period (usually 14 candles), translating that into a 0 to 100 scale.
The classic reading uses two levels: above 70, the asset is considered overbought (it rose too fast and may correct); below 30, oversold (it fell too much and may bounce). These levels are not automatic buy or sell orders — they are alerts that the move may be stretched.
Traders also watch for divergences: when price makes a new high but the RSI does not follow, it is a sign that the uptrend may be losing strength (and vice versa).
The RSI works best combined with other tools — like moving averages and candlestick reading — rather than used alone. In strongly trending markets, it can stay overbought or oversold for a long time without reversing, so context is essential.