What is RSI? The Relative Strength Index explained
The Relative Strength Index (RSI) is a 0–100 momentum oscillator that compares recent gains with recent losses to show how stretched a price move is.
What RSI measures
The Relative Strength Index is a momentum oscillator introduced by the technical analyst J. Welles Wilder Jr. in 1978. It answers a simple question: over the last few candles, how much of the movement was up and how much was down? The answer is squeezed onto a scale from 0 to 100, so readings can be compared across any asset and any timeframe.
Despite the name, RSI does not compare one stock with another or with an index — that is usually called relative performance. It compares an asset only with its own recent history.
How RSI is calculated
Each period's price change is recorded as a gain (the close rose) or a loss (it fell). RSI then compares the average gain with the average loss over a look-back window, 14 periods by default:
RS = average gain ÷ average loss RSI = 100 − 100 ÷ (1 + RS)
The first averages are simple means of the first 14 changes. After that, Wilder's smoothing takes over: new average = (previous average × 13 + latest gain or loss) ÷ 14. This makes RSI calmer than a plain rolling average would, and it is how the RSI on our charts is computed. With no losses in the window RSI is 100; with no gains it is 0.
How to read it — a worked example
Suppose that over the last 14 days a stock's average daily gain is $1.50 and its average daily loss is $0.50. RS = 1.5 ÷ 0.5 = 3, so RSI = 100 − 100 ÷ (1 + 3) = 75. Gains have outweighed losses three to one: the move is strong and somewhat stretched.
The usual readings: above 70 is labelled overbought and below 30 oversold. The 50 line separates bullish from bearish momentum — in healthy uptrends RSI often finds support around 40–50 instead of falling to 30. And a divergence, where price makes a new high while RSI makes a lower high, warns that the move is losing force.
Limitations and common mistakes
Overbought does not mean 'about to fall'. In a strong trend RSI can sit above 70 for weeks while price keeps climbing, and selling every time it crosses 70 is one of the most expensive beginner habits. The same goes for 'oversold' during a crash.
RSI is built entirely from past closing prices, so it adds no new information — it re-expresses momentum. Settings matter too: a 7-period RSI hits extremes far more often than a 21-period one, and an hourly chart throws off many more signals (and false alarms) than a daily chart. Use RSI as context alongside trend, support and resistance and volume, not as a trading system on its own.
RSI in crypto and other 24/7 markets
Crypto never closes, so a daily RSI on Bitcoin covers 14 calendar days, while on a stock it covers 14 trading sessions — roughly three weeks. Crypto also trends violently: readings above 80 or below 20 are more common than in large-cap stocks, which is why some traders use 80/20 instead of 70/30 on volatile assets. You can switch RSI on from the indicator menu of any chart on the site and compare, say, Bitcoin with the S&P 500.
Frequently asked questions
What is a good RSI value?
There is no 'good' value — RSI describes momentum, not quality. Readings between 30 and 70 are considered normal; above 70 means gains have dominated recently (overbought), below 30 that losses have (oversold). Whether that is an opportunity depends on the trend and the wider context.
What does RSI 14 mean?
It means the indicator uses the last 14 periods — the last 14 candles of whatever chart you are viewing. On a daily chart that is 14 days, on an hourly chart 14 hours. Fourteen was Wilder's original setting and is still the most widely used.
Is RSI reliable?
RSI is a useful gauge of momentum, but no indicator is reliable on its own. It works best in sideways markets and gives misleading overbought or oversold readings in strong trends, so combine it with trend analysis and sound risk management.