The Relative Strength Index (RSI) is a widely used momentum oscillator that measures the speed and change of price movements to identify overbought or oversold conditions in a market. It ranges from 0 to 100 and is typically set with a 14-period default.

How to Trade with RSI:

1. Identify Overbought and Oversold Levels:
Overbought: An RSI above 70 indicates that the market is overbought, suggesting a potential price reversal or correction.
Oversold: An RSI below 30 signals the market is oversold, indicating a possible upward reversal.

2. Divergence:
A bullish divergence occurs when the price makes lower lows, but the RSI forms higher lows. This suggests a weakening bearish momentum and a potential upward trend reversal.
A bearish divergence occurs when the price increases, but the RSI forms lower highs, hinting at a potential bearish reversal.

3. Trend Confirmation:
Use RSI to confirm trends. For example, in an uptrend, RSI typically stays above 40, while in a downtrend, it remains below 60.

4. Combine with Other Tools:
Enhance accuracy by pairing RSI with moving averages, support and resistance levels, or candlestick patterns.

By understanding these signals and combining them with proper risk management, traders can effectively use RSI to time their trades.

The RSI helps traders judge momentum and spot potential reversals. It ranges from 0 to 100 and is often used with levels at 30 and 70. When RSI drops near 30, it suggests a market that may be oversold, while readings near 70 point to possible overbought conditions. Traders look for price reactions around these areas before entering. Divergence is another useful signal. If price makes a new high but RSI does not, momentum may be weakening. The same applies when price makes a new low, and RSI fails to confirm it. Many traders combine RSI with trendlines or support and resistance to filter false signals. The goal is not to trade the indicator alone but to use it to strengthen timing and improve decision-making.