RSI (Relative Strength Index)

How it works

The Relative Strength Index, created by J. Welles Wilder, measures the speed and magnitude of recent price changes over a chosen period — typically 14 days. It compares the average size of up-days to down-days and plots the result on a 0–100 scale. The conventional reading: above 70 = overbought (price may have risen too fast), below 30 = oversold (price may have fallen too far). RSI near 50 suggests neutral momentum.

How traders use it

Many swing traders watch for RSI to cross back below 70 as a sell hint or above 30 as a buy hint. A more advanced signal is divergence — when price makes a new high but RSI makes a lower high, hinting the uptrend is weakening. RSI is available on every charting platform Indian traders use, from Zerodha Kite to TradingView and Upstox.

In India

RSI is one of the most popular indicators among Indian retail traders on Nifty and Bank Nifty charts, partly because it is simple and visual. It works on any timeframe — a 5-minute RSI for intraday or a weekly RSI for positional trades. SEBI-registered research analysts often quote RSI levels in their daily market notes.

Common mistakes

The biggest error is treating RSI as a standalone buy/sell trigger. In a strong trend, RSI can stay above 70 (or below 30) for weeks while the price keeps climbing or falling — selling a roaring bull stock just because RSI hit 70 leaves big gains on the table, and "buying the dip" in a collapsing stock simply because RSI is below 30 catches a falling knife. Another mistake is changing the look-back period until RSI happens to confirm a view you already hold. Use RSI alongside the prevailing trend, support and resistance, and volume rather than in isolation, and adjust your reading to the regime: overbought/oversold signals are most reliable in range-bound markets, while in strong trends the more useful signal is RSI divergence or a failure to reach extreme levels. Treat it as a gauge of momentum and risk, not a guaranteed reversal alarm.