What is RSI in the stock market?

RSI, or the Relative Strength Index, is a momentum indicator scaled from 0 to 100 that measures how much of a stock's recent movement has been up versus down. Readings above 70 are called "overbought" and below 30 "oversold". It is a gauge of how stretched a move is, not a forecast of where price goes next.

What does an RSI below 30 mean for a stock?

An RSI below 30 means the stock has fallen hard and fast relative to its recent history — it is "oversold". On average, oversold readings have been followed by a bounce more often than by further heavy selling, but this is a tendency, not a rule: in a genuine downtrend RSI can stay below 30 for a long time while price keeps falling. It is a yellow flag worth watching, not a buy signal on its own.

What is the best RSI setting?

There is no universal best setting. The classic is a 14-day period with 70/30 thresholds. Shorter periods react faster but fire more false signals; wider thresholds (80/20) trigger less often but later. The bigger driver of whether RSI helps is the market regime — it works in range-bound markets and fails in trends — far more than the exact numbers you pick.

Does RSI work for timing the market?

Only as one input among several, and only with discipline. On its own, mechanically buying every oversold reading and selling every overbought one tends to underperform simply staying invested, because it exits strong trends far too early. RSI is most useful for describing the current condition of a market, not for issuing buy and sell commands.

RSI Stock Indicator: What It Means & When It Lies

Live RSI — S&P 500 (SPY)

Neutral

As of 2026-06-05 · educational, not investment advice

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What it is

RSI is a momentum oscillator that lives on a 0–100 scale. It answers a single question: over the recent past, how much of the price movement has been up versus down? When buyers have dominated, RSI climbs toward 100; when sellers have, it falls toward 0.

The two famous lines are 70 and 30. Above 70 a stock is conventionally called "overbought" — it has run hard and fast. Below 30 it is "oversold" — it has fallen hard and fast. The standard setting is a 14-day lookback, the one J. Welles Wilder published in 1978.

Underneath, RSI is a mean-reversion idea: the bet that after price stretches to an extreme it tends to snap back toward the middle. That bet is sometimes right and sometimes catastrophically wrong — which is the whole point of reading it carefully.

How it's calculated

RSI compares the average size of recent up-moves to the average size of recent down-moves. Over a 14-day window it averages the gains on up-days and the losses on down-days, takes the ratio (that ratio is the "relative strength"), then squashes it onto 0–100:

RSI = 100 − 100 / (1 + average gain / average loss). If there have been no down-days at all, the formula pins to 100; no up-days pins it to 0. You never have to compute it yourself — every charting tool draws the line — but knowing it is just a smoothed up-vs-down ratio strips away the mystique.

How to read it

Above 70 — overbought

Caution

Strong recent buying. A yellow flag that the move is stretched — not a sell button. In a powerful uptrend RSI can sit above 70 for weeks.

Below 30 — oversold

Bullish lean

Heavy recent selling. Historically this has preceded bounces more often than further collapse — but "oversold" in a real downtrend can keep getting more oversold.

Between 30 and 70 — neutral

Neutral

No extreme. RSI is telling you very little here; the signal only carries information near its edges.

When it fails

RSI fails in exactly the market most people want it to work in: a strong trend. "Overbought can stay overbought" is not a slogan, it is the dominant failure mode — a rule that sells every time RSI crosses 70 will exit a roaring bull market again and again and watch it run away without you.

The honest framing is that RSI is a condition, not a trigger. It tells you the market is stretched; it cannot tell you it is about to turn. It shines in range-bound, choppy markets where price genuinely oscillates, and it churns out losing signals in trends. Before you act on a single overbought or oversold reading, it is worth feeling that difference for yourself on the slider.

See it for yourself

Play with the RSI rule

Drag the period and the 70/30 thresholds, then dial the market between "range-bound" and "strong trend" and watch the same RSI rule go from brilliant to broken.

Play with the RSI rule →

Frequently asked

What is RSI in the stock market?: RSI, or the Relative Strength Index, is a momentum indicator scaled from 0 to 100 that measures how much of a stock's recent movement has been up versus down. Readings above 70 are called "overbought" and below 30 "oversold". It is a gauge of how stretched a move is, not a forecast of where price goes next.
What does an RSI below 30 mean for a stock?: An RSI below 30 means the stock has fallen hard and fast relative to its recent history — it is "oversold". On average, oversold readings have been followed by a bounce more often than by further heavy selling, but this is a tendency, not a rule: in a genuine downtrend RSI can stay below 30 for a long time while price keeps falling. It is a yellow flag worth watching, not a buy signal on its own.
What is the best RSI setting?: There is no universal best setting. The classic is a 14-day period with 70/30 thresholds. Shorter periods react faster but fire more false signals; wider thresholds (80/20) trigger less often but later. The bigger driver of whether RSI helps is the market regime — it works in range-bound markets and fails in trends — far more than the exact numbers you pick.
Does RSI work for timing the market?: Only as one input among several, and only with discipline. On its own, mechanically buying every oversold reading and selling every overbought one tends to underperform simply staying invested, because it exits strong trends far too early. RSI is most useful for describing the current condition of a market, not for issuing buy and sell commands.

Keep going

Educational, not investment advice. No signal predicts the future, and no single reading is a buy or sell instruction — this is a structured way to understand what each timing signal is actually telling you.

RSI, honestly: what "overbought" and "oversold" really tell you