← Reading the Chart · lesson 7 of 10
By the end of this one you'll know what RSI measures, what people mean when they say overbought and oversold, and why a high reading is never a promise.
RSI stands for Relative Strength Index, which is a fancy name for a simple gauge that runs from 0 to 100. All it really measures is how the recent up days compare to the recent down days, how hard the price has been running and in which direction. I think of it like judging a horse that's been worked all week. When RSI climbs above 70, folks say overbought, meaning the horse has been galloping uphill a long while without a rest. When it drops below 30, they say oversold, the horse has been driven down hard and long. But a strong horse can run tired far longer than you'd ever guess, so a high reading is not a stop sign and a low reading is not a starting gun. The gauge describes the run behind you, never the road ahead.
Same lesson, told by a hundred dollar bill. Tap to walk it one step at a time.
In this example, a coin runs from $100 to $140 in one week, so $100 became $140, and the RSI gauge now reads 82, up in what folks call overbought.
That number does not order the price to fall.
Sometimes a run like that cools off and the $140 slides back toward $125, and other times the horse keeps galloping and $140 becomes $160.
The gauge measured the sprint that already happened, not the one that might come next.
You're in the mechanic's waiting room staring at a $480 estimate for the van. Your app pings: the coin you've watched climb all month now reads RSI 78, overbought, and the man in the next chair glances over and says that means a crash is coming.
Pick your move. Then peek at the other roads if you're curious.
RSI measures how hard the price has been running lately, so a high reading describes the sprint behind, never the road ahead.