What is RSI (relative strength index)?
The relative strength index (RSI) is a momentum indicator that measures how fast and how far a stock's price has moved recently, on a scale from 0 to 100. It is usually calculated over 14 days. Readings above 70 are often labeled overbought and readings below 30 oversold, hinting that a recent move may be stretched.
RSI matters as a read on timing and mood rather than on the underlying business. It rises when recent gains outweigh recent declines and falls when declines dominate, so it captures whether buyers or sellers have been in control lately. Technical traders watch it for signs that a fast move has run ahead of itself and could pause or turn.
The overbought and oversold labels are not instructions. A strong stock can stay overbought for weeks during a powerful run, and a weak one can stay oversold. RSI is most useful as one clue among many, read alongside the trend, valuation, and the company's fundamentals rather than on its own.
| RSI reading | Common label |
|---|---|
| Below 30 | Oversold zone; the recent decline may be stretched. |
| 30 to 70 | Neutral range; no strong momentum extreme. |
| Above 70 | Overbought zone; the recent gain may be stretched. |
Frequently asked questions
Does a high RSI mean a stock will fall?
Not on its own. A reading above 70 shows strong recent momentum, and a stock can stay there for a long time during a strong uptrend. RSI flags that a move has been fast, not that a reversal is due, so it is best combined with other evidence.
What time period does RSI use?
The most common setting is 14 periods, 14 days on a daily chart. Shorter settings react faster but give more false readings; longer settings are smoother but slower. The 14-day version is the standard most tools display by default.