RSI

How RSI is calculated

RSI compares the average size of recent up moves to the average size of recent down moves over a lookback, usually 14 periods, then scales the result onto a 0 to 100 line. Readings above 70 are often called overbought and below 30 oversold.

How RSI is used

• →Watch the 70 and 30 levels for stretched conditions, but treat them as warnings, not automatic entries.
• →Look for divergence, where price makes a new high or low that RSI does not confirm.
• →In strong trends, use the 40 to 60 zone as support or resistance rather than fading 70 or 30.
• →Combine RSI with price structure instead of trading it in isolation.

Common mistakes

• ✕Shorting just because RSI is above 70 in a strong uptrend, where it can stay high for a long time.
• ✕Trading divergence with no price confirmation, since divergence can persist.

Watch: RSI explained