RSI (Relative Strength Index) is a momentum oscillator developed by J. Welles Wilder Jr. It ranges from 0 to 100 and identifies overbought/oversold conditions.
RSI Levels
| Level | Meaning |
|---|---|
| Above 70 | Overbought — potential sell signal |
| Below 30 | Oversold — potential buy signal |
| 50 | Neutral — trend divider |
Trading Signals
1. Overbought/Oversold
- RSI > 70 — Look for selling opportunities
- RSI < 30 — Look for buying opportunities
2. Divergence
- Bullish: Price lower low, RSI higher low
- Bearish: Price higher high, RSI lower high
3. Center Line (50)
- RSI crosses above 50 — Bullish
- RSI crosses below 50 — Bearish
Best Settings
| Timeframe | Period | Overbought | Oversold |
|---|---|---|---|
| Day trading | 9-14 | 80 | 20 |
| Swing trading | 14 | 70 | 30 |
| Position trading | 21 | 65 | 35 |
Key Points
- Default period: 14
- RSI can stay overbought/oversold in strong trends
- Divergence is the most reliable RSI signal
- Combine with support/resistance levels