William Anthony217_ King

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What is RSI and how to trade with it?

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of price movements on a scale from 0 to 100. Traditionally, values above 70 indicate an overbought condition, suggesting a possible price pullback, while values below 30 indicate oversold conditions, hinting at a potential rebound. Traders often use RSI to spot divergences, where the indicator moves opposite to price, signaling weakening momentum and possible reversals. For example, if the price makes a higher high while RSI makes a lower high, it can indicate a bearish reversal. RSI works well in range-bound markets to time entries and exits, but during strong trends it may remain overbought or oversold for long periods. Combining RSI with trend indicators such as moving averages improves accuracy. Adjusting RSI settings to 14 periods is common, though some traders use shorter settings for faster signals. Proper use requires patience and risk control to filter out false signals.