Technical indicators
Relative Strength Index (RSI)
Definition
RSI is a momentum oscillator from 0 to 100 that compares the size of recent gains with recent losses, over 14 periods by default. Readings above 70 are called overbought and below 30 oversold, but in a strong trend RSI can stay there for a long time.
Example
Suppose that over the last 14 days a stock’s average gain is $0.60 and its average loss is $0.20. Gains are three times the losses (RS = 3), so RSI = 100 − 100 ÷ (1 + 3) = 75, above the 70 overbought line. Despite the name, RSI compares the stock only with its own recent moves, not with the market or other stocks.
Hypothetical numbers, for illustration only.
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