RSI Explained Simply: The Market's Speedometer

RSI — the Relative Strength Index — appears in nearly every stock discussion, including our score breakdowns. Here's what the number actually says.

The idea

RSI compares recent up-days against recent down-days (over 14 sessions) and squeezes the answer into a 0–100 scale. Persistent gains push it toward 100; persistent losses toward 0. Think of it as a speedometer for price momentum — not where price is, but how hard it's been pushing in one direction.

The classic zones

• Above 70 — "overbought." The rally has been unusually one-sided. This is a *caution light*, not a sell signal: strong stocks routinely stay overbought for weeks while climbing.
• Below 30 — "oversold." Selling has been relentless. Bounces often start here — but "oversold" can always get more oversold. Falling knives read 25 the whole way down.
• 40–60 — neutral. The tug-of-war is balanced.

How SelectStock uses it

Our technical score rewards the 55–70 zone — meaningful upward momentum that hasn't reached euphoria. And our RSI Oversold Reversal strategy doesn't buy low RSI blindly: it waits for RSI to *cross back above 30 with price confirming* — the difference between catching a falling knife and picking it up after it lands.

The trap to avoid

Beginners see RSI 75 and short, or RSI 25 and buy, as if the scale were a rubber band that must snap back. In strong trends it doesn't. RSI works best as a *context* tool: it tells you whether a breakout has fuel behind it, or whether a dip in an uptrend has reset the spring. Always read it beside the trend, never instead of it.