RSI (Relative Strength Index) is a momentum indicator that measures how fast and how strongly a stock's price has moved over a recent period, typically 14 sessions. It's expressed on a 0 to 100 scale.
How it's calculated, in simple terms
RSI compares the average of the gains against the average of the losses over the chosen period. If in those 14 days the gains were much bigger and more frequent than the losses, RSI rises toward 100. If the opposite happened, it drops toward 0. You don't need to calculate it by hand — the scanner does it for you for every stock — but understanding the logic helps you avoid treating it as a black box.
The zones that matter
- Above 70: overbought zone. The price has risen strongly and quickly; it doesn't mean it will fall immediately, but the short-term "fuel" may be running low.
- Below 30: oversold zone. The price has fallen sharply; it can be a sign of a bounce, or simply a strong downtrend that keeps falling (RSI can stay "oversold" for weeks in a serious decline).
- Between 50 and 70: the zone the DSMarketLearning scanner weighs most heavily in the score, because it usually signals healthy bullish momentum without yet being at the overbought extreme.
The most common mistake
Using RSI alone, without context. An overbought RSI inside a strong uptrend (for example, with the price above its 200-day average) is very different from an overbought RSI inside a bounce within a downtrend. That's why the scanner combines RSI with trend (MA200) and relative strength vs. the market, instead of using it in isolation.
This article is educational content, not personalized investment advice. Before making decisions, read our disclaimer.