RSI — Relative Strength Index

The default is 14. Shorter (e.g. 7) is more sensitive, longer (21) is smoother. Stick with 14 unless you have a reason.

No. In a strong uptrend RSI can stay above 70 for a long time. Overbought is an «alert», not an entry.

Also known as: Relative Strength Index, RSI 14

Momentum oscillator bounded between 0 and 100. Classic thresholds — over 70 is overbought, under 30 is oversold.

Formula

\mathrm{RSI} = 100 - \frac{100}{1 + \mathrm{RS}}, \qquad \mathrm{RS} = \frac{\text{Avg Gain over N}}{\text{Avg Loss over N}}

RSI > 70 — overbought (caution, not auto-sell).
RSI < 30 — oversold (caution, not auto-buy).
RSI centerline 50 — trend bias: above 50 = bullish momentum, below = bearish.
Divergence — price makes a new high/low but RSI doesn't. Early reversal warning. See Divergence.

Shorting every «overbought» RSI in a bull market is a fast way to lose money. Use RSI with trend context (e.g. price vs EMA 200).

What period should I use?

The default is 14. Shorter (e.g. 7) is more sensitive, longer (21) is smoother. Stick with 14 unless you have a reason.

Is overbought always a sell signal?

No. In a strong uptrend RSI can stay above 70 for a long time. Overbought is an «alert», not an entry.