Also called Relative strength index

RSI

A 0 to 100 gauge of how one-sided recent moves have been. Conventionally below 30 is oversold and above 70 overbought, though a strong trend can hold an extreme for weeks.

Updated 2026-09-03

The relative strength index compares the size of recent gains to the size of recent losses and expresses the result on a scale from 0 to 100. Above 70 is conventionally called overbought and below 30 oversold.

The conventional reading is where most people go wrong with it. A high RSI does not mean a stock is due to fall. It means the stock has been going up strongly, which in a genuine trend is exactly what you would expect and exactly what you want. Strong trends routinely hold an RSI above 70 for weeks, and selling into that because a threshold was crossed is selling the best part of the move.

Where it is actually useful

As a filter rather than a trigger. Entering a long position when RSI is already at 85 means paying for a move that has largely happened, so a trend strategy may sensibly withhold a confidence bonus there without refusing the trade outright. Divergence is the other use: price making a new high while RSI does not is momentum weakening under a price that has not yet noticed.

RSI behaves completely differently in trending and ranging markets, which is why it is usually paired with something that measures trend strength, such as adx. Used alone it is a mean-reversion tool applied indiscriminately to markets that are not mean-reverting.

See also

  • Mean reversion — The tendency of a stretched price to drift back toward its own average. Angie measures how often that actually happened for a name rather than assuming it will.
  • Signal confidence — The weighted entry score a bar must clear before the strategy opens a trade, built from trend and momentum agreement. It says nothing about whether a stock is cheap.
  • Z-score — How many standard deviations today's price sits from its recent average. Two sigma below means a move this far down happened on roughly one day in forty.

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Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.

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