RSI & momentum
A speedometer for how stretched a move is
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Price tells you where the market went. RSI tells you how *fast* it got there — and whether that speed is about to blow a tyre.
Orange Put here. 👋 Let me hand you a speedometer. A trend can run, but can it run *forever*? RSI — the Relative Strength Index — is the little gauge that whispers when a move is racing too fast to last.
It squeezes all the recent gains and losses down to a single number between 0 and 100. High means price has been rising hard; low means it has been falling hard. One glance and you know if a move is stretched.
The two lines that matter
You could stare at every value, but really only two levels do the heavy lifting: 70 and 30.
Above 70 — overbought. The rise has been fast and furious; the move is stretched upward and a pause or dip may be brewing. Below 30 — oversold. The fall has been brutal; the move is stretched downward and a bounce may be coming. Around 50 — neutral. No strong momentum either way, just the calm middle.
RSI is a *momentum* indicator — it measures the speed and force of recent moves, not the direction the trend will take next. High just means "this got here in a hurry."
The rookie trap: 70 is not a sell button
Here is the mistake that costs beginners real money. They see RSI tick above 70, yell "overbought!", and short the market on the spot. Then they watch price keep climbing for weeks while they bleed.
The truth: in a powerful trend, RSI can stay pinned above 70 for a long, long time while price marches higher. Overbought does not mean "reverse now" — it means "this is stretched, tread carefully."
Overbought means "careful," not "short it now." A strong trend can stay red-hot far longer than you can stay solvent fighting it.
RSI is the dashboard light that flickers when the engine runs hot — a prompt to check your surroundings, not to slam the brakes. Never trade it alone.
Pair RSI with the tools you already learned. An overbought reading *at a resistance ceiling*, against the trend, is far more meaningful than 70 in isolation. Confluence is where RSI earns its keep.
You can now read how stretched any move has become and dodge the classic overbought trap. Next we take two moving averages and fuse them into a proper momentum radar — the MACD. 🚦