The Relative Strength Index (RSI) measures the speed and size of recent price moves on a scale of 0 to 100. It answers one question: is momentum stretched? It does not, on its own, tell you when to buy or sell, and treating it that way is how most people lose money with it.
Overbought and oversold
By convention, RSI above 70 is called overbought and below 30 oversold. The trap is reading those as automatic sell and buy signals. In a strong uptrend, RSI can sit above 70 for weeks while price keeps climbing; in a hard downtrend it can stay under 30 the whole way down.
The fake-out that costs money
Buying every oversold reading in a downtrend is a reliable way to catch falling knives. RSI reaching 30 in a market that's trending down is normal, not a bottom. Momentum being stretched only matters when the larger trend gives it a reason to snap back.
How to use RSI well
Use RSI as one confirmation among several, never alone. An oversold RSI is far more meaningful when price is also holding above a long-term moving average and a reversal candle prints. That's the whole idea of confluence: RSI supplies the momentum read, the trend and the candle supply the context. LazyChart's RSI-based strategy requires that agreement before it fires, rather than reacting to the 30 line by itself.
Informational and educational only, never financial advice.