7.19What is RSI?
1What is it?
The Relative Strength Index (RSI) is a momentum indicator from 0 to 100 that compares recent gains with recent losses (usually over 14 periods).
2Why does it exist?
Above 70 is called overbought (rose fast); below 30 is oversold (fell fast).
3Diagram
4Calculation
RSI = 100 − 100 ÷ (1 + Average gain ÷ Average loss)
- Over 14 days: average gain ₹2, average loss ₹1.
- RS = 2; RSI = 100 − 100 ÷ 3 ≈ 66.7.
RSI ≈ 67: strong, but not yet "overbought".
5Risks
- In strong trends RSI can stay "overbought" for weeks while price keeps rising.
- Oversold can get more oversold.
6Quick revision
- 0–100 momentum gauge.
- >70 overbought, <30 oversold.
- Not a sell/buy signal alone.
7Knowledge check
Q1. RSI 80 means?Show answer
Overbought: price has risen fast.
Q2. Is RSI 25 a guaranteed buy?Show answer
No.
Q3. Default RSI period?Show answer
14.