RSI measures how strong recent gains are compared with recent losses, on a 0–100 scale. Default period: 14.
Three ways to use RSI
- Overbought/oversold: above 70 is stretched up, below 30 stretched down. Best in ranges.
- Trend filter: RSI holding above 50 in an uptrend, below 50 in a downtrend.
- Divergence: price makes a new high, RSI doesn't. Momentum is fading.
Wick says
RSI is like a fuel gauge. 70 means the tank is full of buyers. It doesn't mean the car stops right now, but the next refill might take a while.
Rookie mistake
Shorting a strong uptrend because "RSI is 75!" Strong trends live above 70. Check the trend first.
Key takeaways
- Above 70 overbought, below 30 oversold.
- The 50 line separates bullish and bearish momentum.
- Divergence is RSI's most powerful signal.