RSI Calculator
Calculate the Relative Strength Index (RSI) to identify overbought or oversold conditions in a stock.
Understanding RSI
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of recent price changes. It ranges from 0 to 100. Readings above 70 suggest a stock may be overbought, while readings below 30 suggest it may be oversold.
The formula is: RS = Average Gain / Average Loss, then RSI = 100 - (100 / (1 + RS)). The standard period is 14 days, but traders adjust this based on their strategy.
Frequently Asked Questions
What is RSI?
RSI stands for Relative Strength Index. It is a technical indicator that compares the size of recent gains to recent losses over a set period. The result is a number between 0 and 100 that helps traders gauge whether a stock is potentially overvalued or undervalued.
How do you interpret RSI?
An RSI above 70 is generally considered overbought, meaning the price may have risen too fast and could pull back. An RSI below 30 is considered oversold, suggesting the price may have dropped too quickly. Values between 30 and 70 are considered neutral.
What does overbought mean?
Overbought means a stock's price has risen sharply in a short time and may be due for a correction or pause. It does not guarantee the price will fall, but it signals that buying momentum is stretched. Many traders use it as a warning to be cautious about new long positions.
What does oversold mean?
Oversold means a stock's price has dropped significantly in a short period and could be ready for a bounce. Like overbought signals, it is not a guarantee of a reversal. It simply suggests selling pressure may be running out and the stock could stabilize or recover.
What are the limitations of RSI?
RSI can stay overbought or oversold for extended periods during strong trends. A stock in a powerful uptrend might show RSI above 70 for weeks without meaningfully pulling back. RSI works best when combined with other indicators and should not be used as a standalone buy or sell signal.
What is a good RSI period to use?
The standard RSI period is 14 days, which works well for most situations. Shorter periods (like 7 or 9) make the indicator more sensitive and produce more signals, but also more false signals. Longer periods (like 21 or 25) smooth out the data but react more slowly to price changes.