What RSI measures
RSI is a momentum oscillator that compares the average size of recent gains to recent losses over a lookback period (14 candles by default), then maps it to a 0–100 scale.
The conventional reading: above 70 is 'overbought', below 30 is 'oversold'. That framing is where most of the trouble starts.
Why overbought isn't a sell signal
In a strong trend, RSI can sit above 70 for a long time while price keeps climbing. Shorting every cross above 70 in a bull run bleeds you out. The same is true in reverse: oversold can stay oversold all the way down.
RSI tells you momentum is stretched, not that it's about to reverse. Stretched can stay stretched.
Better ways to use RSI
The higher-value uses are divergence — price makes a higher high while RSI makes a lower high, hinting momentum is fading — and confluence, where RSI lines up with a key support/resistance level and the prevailing trend.
Treat RSI as a filter, not a trigger. Combine it with structure and your plan, and always define risk before the trade.