Charts & technicals
Relative strength index
Also called RSI
An oscillator from 0 to 100 measuring how one-sided recent price moves have been.
How it works
RSI compares the size of recent gains to recent losses over a window, usually fourteen periods. Above 70 is conventionally called overbought and below 30 oversold.
It is a description of momentum, not a prediction.
Where it misleads people
Strongly trending securities stay above 70 for months. Selling because RSI is high is systematically selling the strongest performers early.
Related terms
- Technical analysisStudying price and volume history to inform decisions, rather than studying the business.
- MomentumThe tendency of recent winners to keep outperforming, and losers to keep underperforming, over months.
- MACDAn indicator showing the gap between two exponential moving averages, with a signal line.
- Mean reversionThe tendency of extreme values — margins, multiples, returns — to drift back towards long-run averages.
Mentioned in
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