Technical Analysis

RSI (Relative Strength Index) — Definition & Example

A 0-100 momentum oscillator — readings above 70 traditionally signal overbought, below 30 oversold.

RSI measures the velocity and magnitude of price movements over a lookback period (typically 14 bars). Above 70 suggests momentum is stretched to the upside; below 30 to the downside. RSI divergence — price making new highs while RSI fails to — is one of the most reliable reversal signals. Used for confirmation of trend exhaustion and counter-trend entry timing.

Formula

RSI = 100 − [100 / (1 + (Average Gain / Average Loss))], where averages are over the lookback window

Example

A stock rallies from ₹100 to ₹120 over 14 bars with strong volume. RSI reads 78 — overbought territory. A pullback to support is statistically more likely than continuation; the trader waits or shorts the rejection.

MACD Moving Average Bollinger Bands Confirmation Bias

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RSI (Relative Strength Index) — Definition & Example

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