Glossary
RSI (Relative Strength Index)
A chart indicator scoring recent price momentum from 0 to 100 by comparing the size of up days with down days.
RSI looks at a stock's recent gains against its recent losses, usually over fourteen trading days, and compresses the comparison into a single number between 0 and 100. A run of strong up days pushes it toward the top of the scale; a run of down days pushes it toward the bottom.
The conventional markers are 70 and 30. Above 70 is labelled overbought and below 30 oversold. Those labels are widely used and worth reading carefully: they describe the arithmetic of recent price changes, not an assessment of what a company is worth. A stock can stay above 70 for weeks while it keeps rising.
RSI is part of technical analysis and is calculated purely from price history. It knows nothing about earnings, debt, or what the company does, which is the honest limit of what any indicator of this kind can say.
Related terms
- MACDMoving Average Convergence Divergence, a chart indicator built from the gap between two moving averages of price.
- Moving AverageThe average closing price over a fixed number of recent days, recalculated daily so it moves along with the price.
- VolumeHow many shares changed hands over a period, usually reported as the total traded during a single day.
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