RSI (Relative Strength Index)
An overbought/oversold indicator on a 0–100 scale, comparing the strength of recent up days versus down days.
In plain terms
If recent days have had more and bigger up moves, RSI reads high (near 100); if more down days, it reads low (near 0).
One number from 0 to 100 shows "how heated up (or cooled off) this stock has been lately." It is usually computed on the last 14 days of movement.
What it tells you
It looks at whether the price has moved too far one way in a short span. When price moves excessively in one direction, it is seen as possibly due for a pause or a pullback — a kind of "overheating thermometer."
Since it compresses purely price action, not earnings or financials, it is used as a reference for gauging short-term flow.
Formula
RSI = 100 − (100 ÷ (1 + RS)) RS = average gain over a period (usually 14 days) ÷ average loss
What high or low means
Generally, 70 or above is read as overbought (short-term overheated), 30 or below as oversold (short-term depressed).
But in a strong up or down trend, RSI can stay above 70 or below 30 for a long time, so it is hard to call direction from one number alone.
RSI looks only at price action, not the company's value (earnings, financials) at all. A low RSI is not "cheap" but only "fell a lot lately." Value has to be checked separately with financial metrics like PER and ROE.
When a strong trend persists, overbought/oversold signals can persist and work in reverse (turning your back early as "overbought" when it should keep rising).
RSI itself is not a buy/sell signal but a description of "price is leaning one way right now." Being a short-term indicator, it is best kept separate from long-term investment judgment.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see RSI and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.