The RSI Indicator: How Traders and Central Banks Use It

The Relative Strength Index (RSI) is a powerful momentum oscillator that traders and even central banks rely on to gauge market conditions. Developed by J. Welles Wilder Jr., the RSI measures the speed and change of price movements on a scale from 0 to 100. Readings above 70 typically indicate an overbought market, suggesting a potential reversal or pullback, while readings below 30 signal oversold conditions, often preceding a bounce. This technical tool helps identify entry and exit points, manage risk, and confirm trends. Its simplicity and effectiveness make it a staple in both retail trading and institutional finance, including central bank policy assessment. Understanding RSI can provide a strategic edge in navigating financial markets.