RSI
Also known as: Relative Strength Index
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements on a scale of 0 to 100.
Plain-English Meaning
RSI is a tool that tells you if an asset might be overbought (too expensive and due for a drop) or oversold (too cheap and due for a bounce). It tracks how fast the price is moving.
Why It Matters
When RSI goes above 70, the market may be overextended. When it drops below 30, sellers might be exhausted. Traders use RSI to look for potential reversal points or confirm an ongoing trend.
Simple Example
If Bitcoin has been rallying hard for days and the RSI reaches 85, traders might view it as "overbought" and prepare for a potential pullback or consolidation.
This educational example uses selected assumptions for reference calculation purposes. Real conditions may vary by broker, exchange, or instrument.
Beginner Mistake
Assuming a high RSI means you should immediately sell, or a low RSI means you should immediately buy. Strong trends can stay overbought or oversold for a very long time.