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.