RSI (Relative Strength Index)

RSI measures how fast and how far price has moved recently, normalized to a scale of 0 to 100. Above 70 is "overbought" — the move has been too fast, a pullback is likely. Below 30 is "oversold" — the drop has been too fast, a bounce is likely. But in strong trends, RSI can stay overbought or oversold for weeks — so those levels alone are not trade signals. The real power of RSI is DIVERGENCE. A bullish divergence happens when price makes a lower low but RSI makes a HIGHER low — meaning the downside momentum is fading even though price is still dropping. A bearish divergence is the opposite at the top. Divergences are high-probability reversal signals at key levels. Most traders use the 14-period RSI as a default. Some shorten it to 7 for faster signals, but 14 is the standard and most common.