The Relative Strength Index, or RSI, is a momentum oscillator that compares smoothed price gains with smoothed price losses. Its value ranges from 0 to 100 and describes an asset’s own price behavior, rather than its performance relative to another asset.
What the number measures
A common setting uses 14 periods and closing prices, with Wilder’s smoothing method. The size of gains and losses matters, not just the number of rising or falling candles. Changing the timeframe or calculation settings changes the result.
When the smoothed average gain equals the smoothed average loss and both are positive, RSI is 50. This does not mean the asset’s price has stayed unchanged throughout the calculation.
Extremes and divergence
Values above 70 are commonly called overbought, and values below 30 oversold. These are interpretive thresholds, not instructions that prices must reverse. RSI can remain extreme during a strong trend.
Traders also watch divergence, such as a higher price high accompanied by a lower RSI high. It can suggest weakening upward momentum, but may persist without a reversal. RSI does not establish fair value or provide a guaranteed entry or exit.