RSI (Relative Strength Index) measures the speed and size of recent price moves on a 0-100 scale. It's simple to read but widely misunderstood — here's what it actually tells you.
RSI above 70 = traditionally 'overbought'. RSI below 30 = traditionally 'oversold'. The idea: extreme readings suggest a reversal is coming. In practice, strong trends can stay overbought or oversold for weeks.
In a strong bull run, RSI can sit above 70 for days while price keeps climbing. Traders who short 'overbought' RSI in a strong uptrend get run over repeatedly. RSI shows momentum, not a guaranteed reversal.
Bullish divergence: price makes a lower low, but RSI makes a higher low — often signals weakening downward momentum. This divergence pattern is generally considered more reliable than raw overbought/oversold levels.
Combine RSI with support/resistance levels and volume, never use it alone. Look for divergence at key levels, not just crossing 70/30. RSI is one piece of context, not a standalone buy/sell signal.
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