What Is the Relative Strength Index (RSI) Indicator?

By Adam Levy – Updated Jan 1, 2025 at 10:55 AM

Key Points

RSI helps identify potential price reversals by using a 0-100 scale to assess if stocks are overbought or oversold.
Traders utilize RSI for spotting ideal times to enter or exit trades, adjusting thresholds for specific stocks.
Though RSI aids short-term trade timing, long-term investors benefit more from focusing on company fundamentals.

The Relative Strength Index, or RSI, is a technical indicator that measures the speed and size of price changes in a security. The RSI can help identify when a security is overbought or oversold, which could indicate an upcoming reversal in its current price. It’s most commonly used by traders looking for entry and exit points on the securities they trade.

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Tiny person casting a big strong shadow. — Image source: Getty Images

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Buy & Hold Strategy

A buy-and-hold strategy in investing entails buying stocks or other securities and not selling them for long periods of time, sometimes decades.

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relative strength index Y chart — Data by https://ycharts.com

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That was a strong signal to buy.

While you shouldn’t base your investment decisions entirely on RSI, it may be something to consider when considering a buy or sell decision.

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About the Author

Adam Levy is a contributing Motley Fool stock market analyst covering technology, consumer, and financial stocks and how policy, economic, and consumer trends shape personal finance, Social Security and retirement savings. Before The Motley Fool, Adam was a financial advisor at Edward Jones. He studied finance and electrical engineering at Carnegie Mellon University.

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