RSI (Relative Strength Index) โ Stock Market Glossary
RSI (Relative Strength Index) is a momentum oscillator that measures the speed and magnitude of recent price changes. It was developed by J. Welles Wilder Jr. in 1978 and remains one of the most popular technical indicators.
How to Read RSI
RSI is expressed as a number between 0 and 100:
| RSI Value | Interpretation |
|---|---|
| RSI โฅ 70 | Overbought โ the stock may have risen too fast; potential pullback ahead |
| RSI 30โ70 | Neutral โ normal trading range |
| RSI โค 30 | Oversold โ the stock may have fallen too fast; potential bounce ahead |
This site shows the 14-day RSI, which is the standard calculation period.
How It’s Calculated
RSI compares the average gains to average losses over a 14-day period:
- Calculate average gain and average loss over 14 days
- Relative Strength (RS) = Average Gain รท Average Loss
- RSI = 100 โ (100 รท (1 + RS))
How It’s Used on This Site
RSI is a key filter in three of our strategies:
- ๐ Moon Shot โ Looks for stocks with RSI < 70 and high beta. The idea: volatile stocks that aren’t yet overbought have room to run.
- ๐ช Falling Knife โ Actively seeks low RSI (oversold) stocks below their 200-day moving average. Contrarian bet on a bounce.
- ๐ Over-Hyped โ Targets stocks with high RSI (overbought). These are potential candidates for mean reversion or short positions.
On individual ticker pages, the RSI badge is color-coded:
- ๐ด Red = RSI โฅ 70 (overbought)
- ๐ข Green = RSI โค 30 (oversold)
- โซ Gray = RSI between 30โ70 (neutral)
Limitations
RSI is a leading indicator โ it’s designed to signal potential reversals before they happen โ but it is based purely on price history. A stock can remain overbought or oversold for extended periods, especially in strong trends. Always use RSI alongside other indicators rather than in isolation.
Related Terms
- Beta โ Measures volatility magnitude; RSI measures directional momentum
- Moving Average (200-Day) โ Often used in combination with RSI to confirm trends
- 52-Week High / 52-Week Low โ RSI extremes often correlate with price extremes
Further Reading
- Practical Guide to Stock Indicators โ RSI explained with real examples from this site’s ticker universe
- Moon Shot Strategy โ uses high beta + oversold RSI to surface growth candidates
- Falling Knife Strategy โ looks for stocks with very low RSI trading below moving averages
- Over-Hyped Strategy โ flags stocks with very high RSI as potential momentum extremes
- Top Stocks by Strategy โ March 2026 โ which tickers have the most extreme RSI values right now
Data on this site is for educational purposes only and does not constitute financial advice.