What is RSI in Stock Market?

The Relative Strength Index (RSI) is a “momentum indicator” that measures the magnitude of recent price gains and losses. It produces a value between 0 and 100 and is commonly used to assess whether an asset’s recent price movement may be relatively strong or weak.

Using it, several traders try to analyse the price momentum. Generally, the following “reference points” are considered:

Note that these levels are reference points and NOT automatic buy or sell signals. Using them, an RSI indicator trading strategy may be developed where traders can potentially examine the following:

• Overbought and oversold conditions
• Movements around the 50 level, or 
• Divergences between RSI and price.

Furthermore, RSI is generally more useful when interpreted alongside the broader price trend and other market information.

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