What Is the Relative Strength Index (RSI)?
The Relative Strength Index (RSI) is a technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The RSI is classified as an oscillator, which means that it fluctuates between values ranging from 0 to 100. The indicator was developed by J. Welles Wilder Jr., and introduced in his 1978 book New Concepts in Technical Trading Systems.
The RSI measures momentum on a scale of zero to 100, with high and low levels marked at 70 and 30, respectively. A move above 70 is considered overbought while below 30 indicates oversold conditions; these are points where traders may look for potential entry opportunities into long or short positions depending upon their outlooks for the security being analyzed. Momentum can be calculated using various time frames such as daily, weekly, monthly etc., but 14 days is generally used as default setting for most charting software packages due to its popularity among traders who use this tool regularly when analyzing stocks or other securities.