RSI is a momentum indicator from 0 to 100 that gauges whether an asset may be overbought or oversold based on recent price changes.
The Relative Strength Index, or RSI, is a technical momentum indicator that measures the speed and magnitude of recent price moves on a scale of 0 to 100.
Traditionally, an RSI above 70 suggests an asset may be overbought and due for a pullback, while an RSI below 30 suggests it may be oversold and could bounce. These are guidelines, not guarantees.
RSI is calculated by comparing the average size of recent gains to the average size of recent losses over a set period, usually 14 days.
Traders use RSI to spot potential reversals and confirm trends, often alongside other indicators. In strong trends, RSI can stay overbought or oversold for long stretches, so it works best as one input among several.
If an asset rallies sharply for two weeks, its RSI might climb to 78, signalling overbought conditions where a pullback becomes more likely. After a steep sell-off, the RSI could fall to 22, an oversold reading that some traders watch for a potential bounce — though neither level guarantees a reversal.
An RSI above 70 traditionally suggests an asset may be overbought after a strong run and could be due for a pullback. It is a guideline rather than a guarantee, and in strong trends RSI can stay above 70 for a while.
The default and most widely used setting is 14 periods. Shorter periods make RSI more sensitive and produce more signals, while longer periods smooth it out; the right choice depends on your trading style.
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