Been looking at RSI indicators and keep seeing these terms thrown around.
When RSI hits 70+ it’s supposedly overbought, and below 30 is oversold. But what does this actually tell me about price movement?
Sometimes price keeps going up even when RSI shows overbought conditions.
RSI measures momentum, not reversals. It’s like checking how fast a car climbs a hill. When RSI hits 70, you’re seeing strong upward movement - but that doesn’t mean the price will drop anytime soon. Prices often keep climbing even with RSI above 80. What matters is catching momentum shifts. If RSI drops from 85 to 65, buying pressure is weakening even if the price hasn’t budged yet.
RSI overbought/oversold levels are warning signs, not trading signals.
RSI above 70 just means recent moves were heavily upward. Doesn’t mean price reverses immediately. I’ve watched strong trends keep RSI above 80 for weeks.
RSI works better in ranging markets. During trends, price stays “overbought” or “oversold” forever.
I mostly use RSI for divergences. Price hits a new high but RSI doesn’t? That’s when I watch for reversals.
For entries, I wait for RSI to pull back from extremes. If it hits 75 then drops below 70, that’s more actionable than just hitting 70.
The 30/70 levels aren’t magic. Some currencies work better with 20/80 depending on volatility.
RSI indicates how far price has moved in one direction.
Being overbought doesn’t guarantee a drop. It means buying pressure is strong and may be slowing down.
I don’t rely on RSI for entries. It’s more about the overall context. When RSI shows overbought and I observe other reversal signals, that gives me confidence.
Keep in mind that RSI measures momentum, not specific price points.
RSI shows if momentum is strong or weak. Prices can remain overbought for longer than you think before changing direction.
RSI’s more like a pressure gauge than a trade signal. Above 70? Heavy buying lately. Below 30? Sellers took over.
Biggest lesson after getting burned repeatedly: overbought can stay overbought forever. I’ve watched EUR/USD hang above RSI 80 for three weeks straight during strong trends.
What works for me is watching how RSI behaves at these extremes. RSI hits 75 then starts making lower highs while price keeps climbing? That divergence matters.
Combining RSI with support/resistance levels is way better too. RSI overbought at major resistance actually means something. Random overbought readings in no man’s land? Not so much.
Never trade RSI levels by themselves. Use them to back up what price action’s already showing you.
RSI shows speed of price movement only.