Relative Strength Index
The Relative Strength Index measures whether recent gains or losses are dominating, on a scale of 0 to 100.
What It Measures
Momentum — how stretched recent buying or selling has been.
The Math (Simplified)
It compares the average size of up-days to the average size of down-days over the last N days and scales that ratio to 0-100.
Default Inputs & Tuning
14 days is the industry standard. Levels 30 (oversold) and 70 (overbought) are the conventional thresholds. Shorter periods move faster but noisier.
When It Works (Market Edge)
Ranging markets, where buying at oversold levels and selling at overbought levels mean-reverts nicely.
When It Fails
Strong trends: RSI can stay below 30 for weeks in a crash (or above 70 in a rally) — 'oversold' is not 'due for a bounce'.
Common Myths
Myth: RSI below 30 means buy now.
Truth: In a strong downtrend RSI can sit below 30 for a long time while price keeps falling. Oversold is a condition, not a guarantee.
Myth: RSI over 70 means the top is in.
Truth: In uptrends RSI routinely stays over 70 for months. Selling at 70 in a bull market means missing most of the move.
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