RSI Indicator Overbought & Over-sold Levels

RSI indicator values of above 70 are considered and regarded to be overbought: traders consider points and levels above the 70 level as market tops & good points for taking profits.

RSI indicator values of below 30 are regarded and considered to be over-sold: traders consider points and levels below the 30 level mark as market bottoms and good points for taking profits.

These overbought & oversold levels should be confirmed by RSI center line crossovers signals. If these regions give a market top or bottom, this trading signal should be confirmed using RSI center line crossover signal. This is because these overbought and oversold levels are prone to giving whipsaws in the market.

In the illustration put on display below, when the RSI hit 70, it showed that the currency was overbought, and this could be interpreted as a trading signal that the trend could reverse.

The currency then reversed the trend after a short while and started to move downwards, until it got to the over-sold levels. This was considered a market bottom after which the currency started to move upwards again.

RSI Strategies

Overbought and Oversold Levels - RSI Strategies

Over Extended Overbought and Oversold Levels

When the market is trending strongly upwards or downward the RSI indicator will stay at these over-bought & oversold levels for a long time. When this happens these overbought and oversold regions can't be used as market tops and market bottoms because the RSI indicator will stay at these technical levels for an extended time period. This is the reason/explanation why we say that the overbought and oversold regions are prone to whipsaws & it's best to confirm these trading signals using RSI centerline crossover trading method.

RSI Indicator Strategy

Over Extended Overbought and Oversold Levels - RSI Indicator Strategy

Get More Courses & Tutorials:

Trade Forex Trading

RSI Indicator Overbought & Over-sold Levels

Over Extended Overbought and Oversold Levels