Relative Strength Index (RSI)
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements in a financial asset. RSI values range from 0 to 100 and are typically used to identify overbought or oversold conditions in the market. An RSI above 70 indicates that an asset may be overbought and due for a price correction, while an RSI below 30 suggests that the asset may be oversold and could experience a price rebound. Traders use RSI to make decisions about buying or selling assets based on momentum signals.
Example
A stock with an RSI of 85 is considered overbought, suggesting that its price may have risen too quickly and is likely to face a short-term correction.
Key points
• A momentum oscillator that measures the speed and change of price movements.
• RSI values above 70 indicate overbought conditions, while values below 30 indicate oversold conditions.
• Used by traders to identify potential price corrections or rebounds.
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