FX
CURIO
Intermediate5 min read

RSI — Relative Strength Index

RSI measures momentum on a 0–100 scale. Learn overbought, oversold, and the powerful divergence signal.

RSI compares the magnitude of recent gains to recent losses on a scale of 0 to 100. It's the most popular momentum indicator because it's simple to read and generates clear signals. The default period is 14.

RSI = 100 − [100 / (1 + Average Gain / Average Loss)]

The Three Zones

RSI LevelMeaning
Above 70Overbought — rally may be exhausted
30–70Neutral — trend continuation zone
Below 30Oversold — decline may be exhausted
Overbought ≠ Sell

In a strong uptrend, RSI can stay above 70 for days or weeks. Selling just because RSI is over 70 is a classic beginner mistake — you're fighting a strong trend. Use overbought as a caution flag, not a sell signal by itself.

The 50 Line: Trend Bias

The 50 line is an underused but powerful feature. When RSI is above 50, bulls are in control; below 50, bears. Many traders use a cross of the 50 line as a trend-confirmation signal, especially in ranging markets.

Divergence: The Strongest RSI Signal

Divergence is when price and RSI disagree. This is the most reliable RSI signal — it warns that momentum is fading before price turns.

Bearish Divergence

Price makes a higher high, but RSI makes a lower high. The rally is running out of fuel — the new high was made with less conviction. This often precedes a reversal.

Bullish Divergence

Price makes a lower low, but RSI makes a higher low. The decline is losing strength — sellers are exhausted. This is a classic bottoming signal.

Divergence at key levels

Divergence is strongest when it appears at a major support or resistance level. RSI bullish divergence at a 200 EMA support is a textbook reversal setup. CURIO's pattern engine flags these automatically.

How to Trade RSI

  • ▸Use RSI as a confirmation, never as a standalone signal.
  • ▸Trend trades: take longs when RSI crosses above 50 in an uptrend; shorts when it crosses below.
  • ▸Divergence trades: wait for divergence + a candlestick confirmation at a key level.
  • ▸Don't fade overbought/oversold in strong trends — wait for the trend to break first.
Apply in CURIO

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