loading...
Relative Strength Index - the go-to oscillator for measuring overbought and oversold conditions
RSI (Relative Strength Index) is a momentum oscillator that measures the speed and magnitude of price changes. Developed by J. Welles Wilder in 1978, it oscillates between 0 and 100, helping identify overbought and oversold conditions.
Key insight: RSI doesn't just show overbought/oversold - it measures the internal strength of price movement. A rising RSI means bullish momentum is accelerating; a falling RSI means momentum is weakening, regardless of price direction.
The indicator is bounded (0-100), making it easy to compare momentum across different assets and timeframes. This normalization is what makes RSI so universally applicable.
Asset may be overextended. Watch for potential pullback or reversal. Not a sell signal by itself.
Normal trading range. Above 50 favors bulls; below 50 favors bears. Trend direction matters most here.
Asset may be undervalued. Watch for potential bounce. Not a buy signal by itself.
Key Signals ▲ Bullish Divergence Price makes lower low, but RSI makes higher low. Shows selling pressure weakening - potential reversal up. One of RSI's most powerful signals.
Price makes higher high, but RSI makes lower high. Shows buying pressure weakening - potential reversal down. Watch for confirmation.
RSI crosses back above 30 from oversold. In uptrends, this is a buying opportunity. Combine with support levels for best results.
RSI crosses back below 70 from overbought. In downtrends, this can signal continuation lower. Combine with resistance levels.
RSI above 70 in an uptrend isn't a sell signal — it's a sign of strength. The biggest mistake traders make is shorting overbought RSI in a bull market. Use RSI for divergence, not for contrarian entries against the trend.
Indicators confirm what price action shows. They don't replace it. Never trade based on an indicator signal alone. Always combine with chart structure, pattern recognition, and volume analysis.
The Academy teaches when to use this indicator, when to ignore it, and how to combine it for high-probability setups.
Join Academy →