What it is
RSI looks at the price changes over a window (typically 14 days) and compares the size of up-day moves to down-day moves. The result is a single number from 0 to 100:
- Closer to 100 means recent days have been mostly gains
- Closer to 0 means recent days have been mostly losses
- 50 means up and down moves have been roughly balanced
What people often cite
- Above 70 — often referenced as a "high-momentum" or "overbought" reading
- Below 30 — often referenced as a "low-momentum" or "oversold" reading
- Between 30 and 70 — the middle band
These bands are conventions, not laws. A stock can stay above 70 for weeks in a strong uptrend without "needing" to fall.
Wilder's smoothing
The classic RSI uses Wilder's smoothing: each day, the running average gain and average loss are blended with the new gain or loss. Smoother than a plain moving average, less reactive than an EMA.
What it isn't
RSI describes recent gains vs losses on the price tape. It does not describe direction next week, or fundamentals, or sentiment. It's one number drawn from price history.