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Momentum over a lookback window

RSI Signals

RSI, or Relative Strength Index, compares recent average gains with recent average losses and turns that relationship into a 0 to 100 momentum reading.

RSI(14)RSI(10)overboughtoversoldlookback

What RSI Is

The plain-English version

RSI stands for Relative Strength Index. It looks at a recent window of price changes and asks whether recent gains have been stronger than recent losses. The result is a score from 0 to 100.

A reading near 50 is balanced. A high reading means recent buying pressure has been strong. A low reading means recent selling pressure has been strong.

What RSI(14) means

The number in parentheses is the lookback length. RSI(14) means the RSI calculation uses the last 14 periods. On a daily chart, that means 14 trading days. On a 1-hour chart, it means 14 hourly candles.

RSI(14) is the common default on many charting platforms because it is the traditional setting introduced by J. Welles Wilder. RSI(10) is faster and more sensitive. RSI(30) is slower and smoother.

How to read the zones

Above 70

Often called overbought. It means recent gains have been strong. This can signal strength, a stretched move, or both.

Around 50

Roughly balanced momentum. Recent gains and losses are closer to even, so RSI is not showing a strong extreme.

Below 30

Often called oversold. It means recent losses have been strong. This can precede a bounce, but it is not a bounce by itself.

Key Ideas

  • The number in parentheses is the lookback length. RSI(14) uses 14 periods; RSI(10) uses 10 periods.
  • On a daily chart, RSI(14) means 14 trading days. On an hourly chart, it means 14 hourly candles.
  • High RSI means recent gains have been stronger than recent losses. Low RSI means recent losses have been stronger than recent gains.
  • Shorter RSI settings react faster but create more noise. Longer RSI settings react slower but smooth out more noise.

Sample Chart

Reading RSI(14) visually

This simplified example shows the same indicator through changing conditions. RSI rises as gains dominate, falls as losses dominate, and moves back toward the middle when momentum becomes more balanced.

305070Day 1Day 5Day 9Day 13Day 17Day 21RSI(14)overbought zoneoversold zone

Rising RSI

Recent gains are becoming larger or more frequent than recent losses. Momentum is strengthening.

RSI above 70

Momentum is strong enough to be considered stretched. It may keep trending, so confirmation matters.

RSI below 30

Selling pressure has been strong enough to be considered stretched. A rebound is possible, not guaranteed.

Common Uses

RSI is commonly used to identify momentum extremes, such as a market that has risen quickly or fallen quickly.
Many charting platforms default to RSI(14), which comes from J. Welles Wilder's original RSI convention.
A common rule of thumb is RSI above 70 as overbought and RSI below 30 as oversold, but those are context clues rather than automatic buy or sell signals.
Trend-following traders often interpret RSI differently from mean-reversion traders. In a strong uptrend, RSI can remain elevated for a long time.

Examples

RSI(14) = 78

The last 14 periods have had much stronger gains than losses. The move may be strong, stretched, or both.

RSI(14) = 24

The last 14 periods have had much stronger losses than gains. The asset may be washed out, but it still needs confirmation before assuming a reversal.

Watch For

  • Overbought does not automatically mean bearish. Strong trends can stay overbought longer than expected.
  • Oversold does not automatically mean bullish. Weak markets can keep falling after RSI first drops below 30.
  • RSI is path-dependent, so the same price level can produce different readings after different recent moves.
  • RSI works best when read together with trend, support/resistance, volatility, or another confirmation tool.