RSI (relative strength index)

The Relative Strength Index (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent losses over a specified period, typically 14 periods. It oscillates between 0 and 100. The index calculates a smoothed average of upward price changes and divides it by the smoothed average of downward price changes, then normalizes the result to create the oscillator. This provides a numerical measure of price momentum.

Retail traders use RSI to identify potential trend reversals or corrections. Readings above 70 typically suggest an asset is overbought, while readings below 30 indicate it may be oversold. Divergence between price and RSI can signal weakening momentum. However, RSI should not be used in isolation; false signals are common, especially in strong trends. Combining it with other tools helps confirm trade entries and exits.