RSI

In detail

RSI, the Relative Strength Index, compares the size of recent gains to recent losses and expresses the result on a 0–100 scale. The standard setting looks back 14 periods. Above 70 is conventionally called overbought, below 30 oversold. Those labels are where most of the misunderstanding lives. RSI measures how one-sided recent movement has been — nothing more. "Overbought" does not mean expensive or due to fall; a stock in a strong uptrend can hold an RSI above 70 for months, and traders who sell on that signal alone spend a lot of time watching things go up without them. The indicator is most informative at the extremes and least informative in the middle of its range. Divergence is the reading practitioners weight more heavily: price makes a new high while RSI does not, suggesting the move is running on thinner momentum. Even then it is a prompt to look, not a signal to act — divergences resolve in both directions, and RSI, like every indicator derived from price alone, tells you what has already happened rather than what comes next.