What’s Relative Strength Index RSI?

Relative Strength Index (RSI) is a popular technical analysis indicator used to measure the strength of price movements and identify potential trend reversals. The RSI indicator was developed by J. Welles Wilder Jr. and was introduced in his book, “New Concepts in Technical Trading Systems.”

The RSI is calculated using a formula that compares the average gains and losses of an asset over a specified period, typically 14 days. The RSI value ranges from 0 to 100, with 70 and above indicating overbought conditions and 30 and below indicating oversold conditions.

When the RSI value is above 70, it suggests that the asset is overbought, and a trend reversal may occur. Conversely, when the RSI value is below 30, it suggests that the asset is oversold, and a trend reversal may occur.

Traders often use RSI in conjunction with other technical indicators to confirm signals and make trading decisions. However, it is important to note that the RSI is not infallible and should be used in combination with other analysis techniques to make informed trading decisions.