The Relative Strength Index (RSI) was developed by J. Welles Wilder and published in 1978. It compares the average size of recent gains to the average size of recent losses over a look-back period — typically 14 days — and compresses the result into a 0–100 scale. A reading above 70 is conventionally labelled overbought; below 30, oversold.
The RSI is a momentum oscillator, which means it measures the rate of price change rather than the direction of price. An asset can become "overbought" during a strong, sustained uptrend and stay that way for weeks — the signal does not automatically mean "sell." This is the most common misapplication of the indicator.
More reliable uses of the RSI include spotting divergence (price makes a new high but RSI does not, suggesting momentum is weakening) and using the 50 level as a trend filter (above 50 = bullish momentum, below 50 = bearish). Like all technical indicators, the RSI works best as one component of a larger framework rather than a standalone timing rule.