Lesson 4 of 66 min readUpdated Sep 2026

Momentum and RSI

RSI(14) measures the speed of price — and it is on your chart.

Written and reviewed by the Fundezy team · how we produce this

Momentum is how fast price is moving; RSI (Relative Strength Index) is its most popular gauge. The platform chart includes RSI(14) — toggle it and it appears in purple with its own 0–100 scale.

How RSI works

RSI compares the average gain to the average loss over the lookback window:

  • RSI > 70 — gains dominate: overbought territory
  • RSI < 30 — losses dominate: oversold territory
  • RSI ≈ 50 — balanced drift

The formula normalizes to 0–100, so RSI is comparable across symbols and timeframes in a way raw prices never are.

The beginner mistake

"RSI is above 70 → short it." In a strong trend, RSI can stay overbought for days while price grinds higher — shorting "overbought" markets in uptrends is one of the most reliable ways to lose money. RSI is a momentum thermometer, not a buy/sell button.

The professional reading:

  • In ranges: extremes (70+/30−) mark mean-reversion opportunities — fade back toward the middle.
  • In trends: use RSI pullbacks toward 40–50 in an uptrend as continuation entry timing, not as a fade signal.
  • Divergence: price makes a new high but RSI doesn't — momentum is quietly fading. Divergence is a caution flag, best used to protect profits or tighten stops, not to initiate naked counter-trends.

Warm-up, again

The platform's RSI returns a neutral 50 until 14+ bars of history exist — the same warm-up discipline as the MAs. Any rule you automate must handle "indicator not ready yet".

Combining with what you know

RSI shines as the second opinion: HH/HL structure says uptrend (Course 02) → price pulls back to SMA(14) (last lesson) → RSI dipping toward 40–50 and turning up = the pullback is ending. Three independent checks, one trade. That stacking — structure first, indicator timing second — is the whole craft.

By the numbers

J. Welles Wilder introduced RSI in his 1978 book New Concepts in Technical Trading Systems — the 14-period default he chose is the one on this platform's charts. The scale is normalised to 0–100: above 70 means average gains dominate, below 30 average losses do, and the platform returns a neutral 50 until 14 bars of history exist.

Practice in the simulator

Toggle RSI(14) and watch it during a pullback — apply what you just read with simulated money.

Check your understanding

4 questions · answer all, then submit.

1. RSI readings above 70 are conventionally labeled…
2. In a strong uptrend, RSI can remain above 70 for a long time. This means…
3. Bearish divergence is when…
4. During warm-up, what does RSI return on this platform?