Glossary
RSI (Relative Strength Index)
A momentum oscillator that measures the speed and magnitude of recent price changes on a scale of 0 to 100.
The Relative Strength Index (RSI) was developed by J. Welles Wilder Jr. in 1978. It compares the magnitude of recent gains to recent losses to identify overbought or oversold conditions. RSI is one of the most widely used indicators in technical analysis and is especially popular for mean-reversion strategies.
Key Points
- Traditionally, RSI above 70 is overbought and below 30 is oversold.
- RSI works best in ranging markets and can fail during strong trends.
- Many traders combine RSI with trend filters to avoid false signals.