RSI Indicator Overbought & Oversold Levels

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

RSI technical indicator values of below 30 are considered to be oversold: forex traders consider points below the 30 level as market bottoms and good points for taking profits.

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

In the example below, when the RSI hit 70, it showed that the forex currency was overbought, and this could be considered a trading signal that the trend could reverse.

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

Overbought & Oversold Levels - RSI Trading Strategies

Over Extended Overbought and Oversold Levels

When the forex market is trending strongly upwards or downwards the RSI indicator will stay at these overbought and oversold levels for a long time. When this happens these overbought and oversold regions cannot be used as forex market tops and forex market bottoms because the RSI indicator will stay at these levels for an extended period of time. This is the reason why we say that the overbought and oversold regions are prone to forex trading whipsaws and it is best to confirm these forex signals using RSI center-line crossover strategy.

Over Extended Overbought & Oversold Levels - RSI Indicator Strategy