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RSI (Relative Strength Index)

A momentum oscillator from 0 to 100 that compares recent gains to recent losses, usually over 14 periods.

Bearish divergence between price and RSIA price line whose second peak is higher than its first, drawn above an RSI panel whose second peak is lower than its first, with the two peaks joined by sloping dashed lines.PRICEhigher highRSI (14)70overbought30oversoldlower high
Divergence between price and RSI. RSI measures how one-sided recent price moves have been on a 0–100 scale. Here price sets a higher peak while RSI sets a lower one, so the second push carried less momentum than the first.

RSI above 70 is conventionally called overbought and below 30 oversold. In a strong trend it can sit above 70 for weeks, so those labels are descriptions, not signals.

Its more useful application is divergence: price makes a new high while RSI makes a lower high, which suggests momentum is fading.

Example: a stock rallies from $50 to $70 with RSI at 82. It pulls back to $65, then rallies to $72 with RSI at 74. That lower RSI high on a higher price high is bearish divergence.

Related: divergence, macd, mean-reversion, trend

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