What is RSI in trading?

The Relative Strength Index (RSI) is a momentum oscillator developed by J. Welles Wilder Jr. that measures the speed and magnitude of recent price changes on a scale from 0 to 100. It is most commonly used to identify overbought and oversold conditions.

What is a good RSI value?

There is no single good RSI value — the value you want depends on the strategy. A value between 30 and 70 is considered the normal range. Above 70 is overbought, below 30 is oversold. Around 50 indicates balanced momentum.

Is RSI above 70 always bearish?

No. In a strong uptrend, RSI can remain above 70 for extended periods. Use overbought readings as a heads-up to tighten risk, not as an automatic short signal. Combine RSI with trend filters such as moving averages.

What is the best RSI setting?

The default and most widely used setting is 14 periods, as originally defined by Wilder. Shorter settings (e.g. 7 or 9) make RSI more sensitive — useful for day trading. Longer settings (e.g. 21 or 25) smooth it out — useful for longer-term swing trading.

What is RSI divergence?

RSI divergence occurs when price makes a new high (or low) but RSI does not — for example, price prints a higher high while RSI prints a lower high. This often signals weakening momentum and a potential reversal.

How is RSI calculated?

RSI uses Wilder's smoothing of average gains and average losses over the period. First compute the average gain and loss over the initial period. Then for each new bar, smooth them with avg = (prev * 13 + new) / 14. Finally: RS = avg gain / avg loss, and RSI = 100 - 100 / (1 + RS).

How many prices do I need to compute a 14-period RSI?

You need at least 15 closing prices (period + 1) — the first 14 are used to seed the average gain and average loss. More prices produce a more accurate, Wilder-smoothed value.