Trader's Glossary

RSI (Relative Strength Index)

Developed by J. Welles Wilder in the 1970s, Relative Strength Index (RSI) is a very popular momentum oscillator used in technical analysis to determine whether an asset is overbought or oversold. Typically it is calculated using 14 periods of historical data. Current price action is assigned a value between 0 and 100 depending on how it relates to the respective average gains and losses for the past 14 periods. If this figure reaches or exceeds 70 then the underlying asset is regarded as being overbought, if it reaches or dips below 30 then it is regarded as being overbought, in both instances a reversal is thought to be imminent and so overbought conditions prompt selling activity, and oversold conditions prompt buying activity.