The Relative Strength Index (RSI) is a technical indicator used in the analysis of financial markets. It is an oscillator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.
The RSI is calculated using the following formula: RSI = 100 – (100 / (1 + (average gain / average loss)))
The indicator ranges from 0 to 100, with high values indicating an overbought condition and low values indicating an oversold condition. Traditionally, an RSI above 70 is considered overbought and below 30 is considered oversold.
It’s commonly used to identify potential turning points in a market, and it can also be used as a trend-following indicator. Typically, traders will use RSI in conjunction with other technical indicators or analysis to make trading decisions.
« Back to Financial Terms Index