The RSI, Relative Strength Index, is a popular technical indicator who measures the strength of the trend of an asset.
Its parameter, by default 14 if your graph is on a daily timeframe, indicates that the calculation of the RSI is taking into account the last 14 days. Its value is between 0 and 100. Some values have to be looked at more closely:
- Between 0 and 30 the asset is oversold, the price will likely bounce back up, but the bears are in charge.
- Breaking the 30 from the bottom indicates a return of buying power.
- Between 70 and 100 the asset is overbought, a price correction is most likely to happen, but the bulls are in charge.
- Breaking the 70 from the top indicates a return of selling power.
- The neutral zone is between 30 and 70.
The indicator allows to determine the strength and the direction of a trend and can indicate potential reversals.