What It Means
RSI (Relative Strength Index) is a momentum indicator, scaled 0 to 100, that measures how fast and how far a stock's price has moved recently. Readings above 70 are conventionally read as overbought; below 30, oversold.
How It Works
RSI is calculated from the average size of a stock's up-moves versus down-moves over a set period, usually 14 sessions, and compresses that into a single number that's easy to scan across many stocks at once. An extreme RSI reading alone isn't a buy or sell signal — a genuinely strong trend can hold RSI above 70 for weeks, and traders who short every "overbought" reading in a strong uptrend often lose money fighting the trend. RSI is more useful for spotting divergence: when price makes a new high but RSI doesn't, that mismatch can hint the momentum behind the move is fading even though price hasn't turned yet.
Warning
Selling purely because RSI crossed above 70, without checking the broader trend, is a common way traders exit a winning position far too early during a strong rally.