The Relative Strength Index (RSI) measures the speed and size of recent moves on a 0–100 scale. It's a momentum gauge — useful, and widely misused.

What RSI shows

RSI rises as gains dominate and falls as losses dominate. Readings above 70 are often called 'overbought' and below 30 'oversold' — but these are not automatic sell/buy signals.

The overbought trap

In a strong trend, RSI can stay overbought for a long time while price keeps rising. Blindly shorting 'overbought' in an uptrend is a classic way to lose. Momentum extremes confirm strength as often as they warn of reversal.

Divergence

The more useful RSI signal is divergence: price makes a new high but RSI doesn't, hinting momentum is fading. Divergence is a warning to tighten risk, not a standalone entry.

Key takeaways

  • RSI gauges momentum 0–100; 70/30 are reference zones, not signals.
  • In strong trends RSI stays extreme — don't fade it blindly.
  • Divergence (price new high, RSI not) warns momentum is fading.
Risk warning: Forex and CFD trading carry substantial risk and most retail traders lose money. This material is educational only and is not financial advice, a signal service, or a profit promise.