The **Relative Strength Index (RSI)** is a momentum oscillator that measures the speed and change of price movements on a scale from **0 to 100**. It was developed by J. Welles Wilder and is one of the most widely used technical indicators.
### Standard RSI Interpretation (14-period is the default and most common)
| RSI Level | Traditional Meaning | Typical Market Condition | Common Trading Interpretation |
|---|---|---|---|
| 70–100 | Overbought | Price has risen too far, too fast | Potential pullback or reversal downward |
| 30–70 | Neutral / Healthy range | Normal trending or ranging market | No extreme condition; trend can continue |
| 0–30 | Oversold | Price has fallen too far, too fast | Potential bounce or reversal upward |
### What is considered a “healthy” RSI?
- **40–60** is generally seen as the healthiest, most sustainable range for a strong trend.
- In a **strong uptrend**, RSI often stays between **40–70** (rarely drops below 40).
- In a **strong downtrend**, RSI often stays between **30–60** (rarely goes above 60).
- Staying in the 40–60 band for long periods indicates a healthy, controlled trend without excessive momentum that could lead to reversal.
### Classic Overbought / Oversold Levels
| Condition | RSI Level | Notes |
|---|---|---|
| Overbought | ≥ 70 | Very common threshold. Some traders use 80 for stronger confirmation in bull markets. |
| Oversold | ≤ 30 | Very common threshold. Some traders use 20 for stronger confirmation in bear markets. |
### Important Variations & Adjustments Traders Use
| Market Environment | Adjusted Overbought | Adjusted Oversold | Reason |
|---|---|---|---|
| Strong bull markets | 80–90 | 30–40 | RSI stays elevated longer |
| Strong bear markets | 50–60 | 10–20 | RSI stays depressed longer |
| Range-bound markets | 70 / 30 (standard) | Classic levels work best | |
| Very short timeframes (e.g., 2–7 period RSI) | 80–90 / 10–20 | Tighter extremes because shorter RSI is more sensitive |
### Summary Table (Most Common Settings)
| RSI Value | Interpretation | Action Most Traders Consider |
|---|---|---|
| Above 70 (or 80) | Overbought | Caution; possible short/sell signal or take profit |
| 50–70 | Bullish / Healthy uptrend | Trend is strong but not extreme |
| 40–60 | Ideal healthy trend zone | Best area for trend continuation |
| 30–50 | Bearish / Healthy downtrend | Trend is strong but not extreme |
| Below 30 (or 20) | Oversold | Caution; possible long/buy signal or bottom |
Bottom line:
- Healthy RSI for a sustainable trend → **roughly 40–60**
- Classic oversold → **≤ 30**
- Classic overbought → **≥ 70**
These levels are guidelines, not hard rules—always use them with price action, trend context, and other indicators.