Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a momentum oscillator used in technical analysis to measure the speed and change of price movements. It is represented as a line chart that oscillates between 0 and 100, with RSI values above 70 indicating overbought conditions and values below 30 indicating oversold conditions. This makes RSI a crucial tool for traders looking to identify possible reversal points in an asset's price trend, especially when combined with other technical indicators.

RSI is calculated by comparing the magnitude of recent gains to recent losses over a specified period, usually 14 periods. When an asset’s price consistently closes higher, RSI will rise, signaling strong bullish momentum. Conversely, when the price closes lower over a period, the RSI will decrease, indicating bearish momentum. This indicator is especially useful in determining the strength of current price trends and whether an asset is likely to continue in its current direction or reverse.