How to use RSI: overbought, oversold & divergence

RSI (Relative Strength Index) is one of the most-used momentum indicators, scaled 0–100 to compare recent buying and selling force. It's simple — and one of the most misused tools, especially "short it because it's overbought".

Settings and readings

The default period is 14. Convention: RSI above 70 = overbought, below 30 = oversold. The more extreme, the stronger the short-term momentum. Add it via the Indicators search (RSI), and tune the period to the instrument — shorter is twitchier, longer is smoother.

Divergence: the better signal

More valuable than overbought/oversold is divergence: price makes a new high but RSI doesn't (bearish divergence) — momentum fading; price makes a new low while RSI rises (bullish divergence) — a bounce may be brewing. Divergence at a key support/resistance level carries far more weight.

Common traps

• Strong trends stay overbought/oversold for ages — don't fade a runaway move on RSI alone.
• RSI is a helper, not a standalone signal — combine with trend, volume and structure.
• RSI means different things on different timeframes — fix your frame first.