Indicators

RSI overbought and oversold

The Relative Strength Index measures the speed of recent moves on a 0–100 scale. Below 30 is oversold, above 70 overbought.

Real example: EUR/USD, 15-minute chart, 2016-11-02. Pattern detected automatically using only the candles before the decision point; on the right, what happened next.

Why it works

Extreme readings show a move has been unusually fast. At a key level, an exit from oversold can mark the start of a bounce.

How to use it

Do not buy just because RSI is below 30. Wait for it to cross back above 30 at a support or liquidity level.

The typical mistake

Selling because RSI is above 70 in a strong uptrend: in trends, RSI can stay overbought for a long time.

FAQ

What is RSI in trading?

The Relative Strength Index measures the speed of recent moves on a 0–100 scale. Below 30 is oversold, above 70 overbought.

How do you trade RSI?

Do not buy just because RSI is below 30. Wait for it to cross back above 30 at a support or liquidity level.