Momentum oscillator from 0 to 100 that compares an asset's average recent gains with its average recent losses.
The Relative Strength Index (RSI) is a momentum oscillator from 0 to 100 that compares an asset’s average recent gains with its average recent losses. Traders use RSI to evaluate the strength and speed of recent price movement, not to compare a security with a benchmark.
RSI thresholds are observations, not automatic buy or sell instructions. A strong trend can keep RSI elevated or depressed for an extended period.
14 periods is a common default, but the timeframe and smoothing method affect the result.70 and below 30 are common reference zones, not guaranteed reversal levels.First calculate relative strength (RS) from average gains and average losses:
Then convert the ratio to the RSI scale:
Losses are normally entered as positive magnitudes in the denominator. Wilder-style calculations use an initial average and then smooth subsequent values; platforms can differ in initialization, rounding, missing data, and the price field used.
Assume the selected lookback produces an average gain of 1.20 and an average loss of 0.40:
An RSI of 75 indicates that average gains dominated average losses in the selected window. It does not establish that the asset is overvalued, suitable to short, or certain to decline.
| Reading or pattern | Common interpretation | Main caution |
|---|---|---|
RSI above 70 | Strong recent gains or “overbought” condition | Strong uptrends can remain above 70 |
RSI below 30 | Strong recent losses or “oversold” condition | Strong downtrends can remain below 30 |
RSI near 50 | Gains and losses are more balanced | Does not mean risk or volatility is low |
| Bullish divergence | Price makes a lower low while RSI makes a higher low | Price may continue falling |
| Bearish divergence | Price makes a higher high while RSI makes a lower high | Price may continue rising |
The terms overbought and oversold describe recent momentum conditions. They do not measure intrinsic value or prove that buyers or sellers are exhausted.
| Feature | RSI | Relative Strength |
|---|---|---|
| Inputs | One asset’s gains and losses | Asset and benchmark prices or returns |
| Output | Number from 0 to 100 | Ratio, normalized line, or relative return |
| Main question | How strong is recent momentum? | Is the asset outperforming the comparison? |
| Common error | Treating a threshold as a reversal guarantee | Treating outperformance as a positive absolute return |
This page is educational only. RSI is not a recommendation or personalized investment, trading, legal, tax, or regulatory advice.