Relative Strength Index (RSI)
Also called: RSI
A momentum oscillator (0–100) measuring recent up-moves against down-moves — used to spot overbought / oversold conditions.
Definition
RSI (Wilder, 1978) compares the average size of recent gains to the average size of recent losses. Values above 70 are conventionally ‘overbought’; below 30 ‘oversold’.
In trending markets, RSI can stay overbought/oversold for long periods. Divergence — price making a new high while RSI doesn’t — is the more reliable signal.
Example
EUR/USD prints a new high but RSI's high is lower than last week's — bearish divergence, momentum is weakening.
Formula
RSI = 100 − (100 / (1 + RS)) RS = avg gain over n periods / avg loss over n periods (default n = 14)
Why it matters
Don't sell just because RSI > 70. In strong uptrends, RSI can stay > 70 for weeks. Use it as a context filter, not a standalone signal.
FAQs
What's the default RSI period?
14 — Wilder's original setting. Shorter periods (5–9) make it more reactive; longer (21+) smoother.