The Relative Strength Index (RSI) measures how strong recent gains are compared with recent losses, on a scale from 0 to 100. The standard setting looks back 14 periods.

Reading the scale

• Above 70: strong upward momentum, often called overbought.
• Below 30: strong downward momentum, often called oversold.
• Around 50: balance.

The overbought trap

Overbought does not mean "about to fall". In a strong uptrend RSI can stay above 70 for a long time while price keeps climbing. Selling every reading above 70 is one of the most common ways beginners lose money.

A better use in trends: in an uptrend, RSI dipping to 40–50 and turning up marks a healthy pullback to buy. In a downtrend, rallies to 50–60 offer chances to sell.

Divergence

Bearish divergence: price makes a higher high but RSI makes a lower high. Momentum is fading behind the move.

Bullish divergence: price makes a lower low but RSI makes a higher low.

Divergence is a warning, not a trigger. Wait for price structure to confirm, such as a break of the most recent swing low after bearish divergence.