RSI explained for traders
Updated May 12, 2026
What RSI measures
The Relative Strength Index (RSI) is a momentum indicator that compares the size of recent gains to recent losses and plots the result on a scale from 0 to 100. It's usually calculated over 14 periods. In short, RSI tells you how fast and how one-sided the recent price action has been — not where price is going next.
Overbought and oversold
By convention, readings above 70 are called "overbought" and readings below 30 "oversold." These labels are widely misunderstood. They don't mean "sell now" or "buy now." In a strong trend, RSI can stay overbought or oversold for a long time while price keeps moving. The levels flag stretched momentum, not a guaranteed reversal.
Divergence: the more useful signal
RSI is often more valuable when it disagrees with price. If price makes a new high but RSI makes a lower high, that bearish divergence hints the move is losing steam. The reverse — price making a new low while RSI makes a higher low — is bullish divergence. Divergence is a warning of fading momentum, not a precise timing tool.
Use it in context
RSI works best as one input among several, confirmed by trend, support and resistance, and the broader setup. On its own it produces plenty of false signals. AlphaForecast blends momentum readings like RSI with trend, news, and event context so that no single indicator drives a forecast — which is exactly how you should use RSI in your own analysis.