The RSI Indicator
Time for your first indicator. The RSI is basically a speedometer for price — here’s how to read it, and the trap that catches beginners who treat it as a magic buy button.
A speedometer for momentum
You've learned to read price. Now meet your first indicator — a calculation laid on top of the chart to reveal something the eye misses. The most popular one for beginners is the RSI (Relative Strength Index), and it's best thought of as a speedometer for price.
RSI is a single line that moves between 0 and 100, measuring how fast and how far price has moved recently. It doesn't predict the future — it tells you whether a move is getting stretched.
RSI doesn't say "buy" or "sell." It says "this move is getting stretched — pay attention."
How beginners actually read it
- Above 70 = "overbought." Price has risen fast; the move may be running out of steam. Not an automatic sell — a caution.
- Below 30 = "oversold." Price has fallen fast; the drop may be overdone. A caution, not an automatic buy.
- The middle (40–60) is normal. RSI is most useful at the extremes, alongside the levels you learned in Lesson 07.
The classic beginner trap: "RSI is over 70, so I'll short it." In a strong trend, RSI can stay overbought — or oversold — for a very long time while price keeps going. An indicator is a clue, not a command. RSI confirms what price and levels are already telling you; it never overrides them, and no single indicator is a strategy.
RSI is a 0–100 speedometer for price — above 70 is overbought, below 30 oversold — flagging when a move looks stretched, as a clue to weigh, never a command to obey.