What RSI measures
The Relative Strength Index compares the size of recent gains with recent losses to show how stretched a price move is. It runs from 0 to 100. High readings mean gains have dominated lately; low readings mean losses have.
How it is calculated
Over the last 14 days:
- Average gain = average of the up-day moves (down days count as zero).
- Average loss = average of the down-day moves, as a positive number.
- RS = average gain / average loss.
- RSI = 100 - 100 / (1 + RS)
Wilder's version smooths the averages so each new day counts for about 1/14 of the value.
Reading it
| RSI | Traditional reading |
|---|---|
| Above 70 | Overbought: the rise may be stretched |
| 30 to 70 | Neutral |
| Below 30 | Oversold: the fall may be stretched |
In a strong uptrend, RSI can stay above 70 for weeks. In a crash, it can stay below 30. "Overbought" does not mean "about to fall".
How this site uses it
The 14-day RSI appears as a metric in Strategies and on the Market Overview. On this site it is a timing aid, not a reason to own a company: see Fundamentals vs technicals.
Limits
- It says nothing about the business.
- Signals fail often in trending markets.
- Backtests of simple RSI rules are prone to Overfitting in investing.
Questions
Is RSI a good indicator?
It is a useful measure of how stretched a recent move is, but alone it is a weak predictor. It works best combined with trend and fundamentals.
What RSI means oversold?
Below 30 is the traditional oversold level; some traders use 20 for a stricter signal.
See also
- Momentum investing What price momentum is, the evidence that recent winners tend to keep winning for a while, how momentum is measured, and its crash risk.
- Mean reversion What mean reversion is, how prices and valuations tend to return toward an average, how traders use it, and why it fails when fundamentals change.
- Simple moving average (SMA) What a simple moving average is, how to calculate it, the common 50-day and 200-day averages, and how investors use them to read a trend.
- Fundamentals vs technicals The difference between fundamental and technical analysis, what each is good for, and why this site uses fundamentals to choose and technicals only as context.
Pages that link here: Frontrunner strategies, Fundamental analysis, If-then signals, TQQQ For The Long Term (FTLT)
Last updated September 30, 2026. Education only, not investment advice.