RSI compares the magnitude of recent gains to recent losses, expressed as a number between 0 and 100. It answers a simple question: is this pair overbought or oversold relative to its recent trading range? The math uses a 14-period default window, though traders adjust it for different timeframes. A reading above 70 suggests buying pressure may be exhausted; below 30 suggests selling pressure may be exhausted.
- Overbought zone
- RSI above 70, indicating price has risen sharply and a pullback or reversal may be near.
- Oversold zone
- RSI below 30, indicating price has fallen sharply and a bounce or reversal may be near.
- Midpoint
- RSI at 50 represents neutral momentum, neither overbought nor oversold.
RSI rises from oversold below 30, signaling momentum turning positive.
RSI falls from overbought above 70, signaling momentum turning negative.
RSI can stay overbought or oversold for extended periods in strong trending markets, giving false signals if you treat it as a reversal timer. It also works better on mean-reverting pairs than on directional trends. The desk uses RSI to spot exhaustion, not to predict turns on its own.
We layer RSI with structure and volume to filter out noise and catch genuine momentum shifts in our morning scan.