Relative strength index (RSI).
In plain English
The relative strength index, or RSI, is a technical indicator that measures the speed and size of recent price moves on a scale of 0 to 100. Readings above 70 are often called overbought, hinting a rally may be stretched, and readings below 30 oversold, hinting a decline may be overdone. Traders use it to spot possible turning points. Like all momentum tools, it is descriptive, not predictive: a stock can stay overbought or oversold for a long time in a strong trend, so RSI signals fail often on their own and are best used with other information.
01Why it matters
RSI is one of the most popular momentum indicators, so understanding that overbought or oversold readings can persist keeps you from treating them as automatic buy or sell signals.
02The math, step by step
A stock's RSI climbs to 78, an overbought reading some traders take as a sign to be cautious. But in a strong bull run the stock keeps rising for weeks while RSI stays high, showing the signal is not a reliable top.
03What this is NOT
RSI is NOT a reliable signal on its own. Overbought and oversold readings can persist for a long time in a trend, so a high or low RSI does not mean a reversal is coming.
04Receipts
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