The RSI was developed by Welles Wilder and indicates when conditions are overbought and oversold. We consider the market overbought when the RSI is over 70 and oversold when it is under 30. We use the overbought and oversold signals on the RSI in conjunction with divergence on our other indicators and this gives us about an 85% success rate trade. See in the chart below how oversold and over bought conditions in the RSI also often lead to big moves in the other direction.
 The above chart shows that the RSI is RED when in the overbought area and BLUE when in the oversold area.  The above chart is an example of the RSI in an oversold position followed by an overbought situation.  The above chart show the RSI in an overbought position followed by a fall in price and then in an oversold position followed by a rise in price.
Labels: relative strength index
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