RSI Explained: How to Use the Relative Strength Index
RSI is one of the most popular momentum indicators. Learn how to use it properly — and avoid the most common mistakes traders make with it.
Technical Analysis · May 16, 2026 · 5 min read
The Relative Strength Index (RSI) measures the speed and magnitude of recent price changes on a scale of 0–100. Developed by J. Welles Wilder in 1978, it remains one of the most widely used momentum indicators in technical analysis.
Overbought, Oversold, and Divergence
An RSI above 70 is traditionally considered overbought; below 30, oversold. However, using these levels mechanically is a common mistake. In a strong uptrend, RSI can stay above 70 for extended periods. RSI divergence is a more powerful signal: when price makes a new high but RSI makes a lower high (bearish divergence), momentum is weakening — often a leading indicator of a reversal.
The Right Way to Use RSI
The most effective RSI application combines it with context. An oversold RSI reading at a major support level carries far more weight than an oversold reading in the middle of a clear downtrend. Use RSI as a confirmation tool rather than a trigger. Also experiment with different periods — the default 14 is widely used, but shorter periods (7–9) generate more signals while longer periods (20–25) generate fewer but more reliable ones.
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