What the RSI measures
The relative strength index, or RSI, is a momentum indicator that moves between 0 and 100. It compares the size of recent gains to recent losses to gauge how strongly price has been moving in one direction. A high reading means strong recent buying; a low reading means strong recent selling.
By convention, readings above 70 are often called "overbought" and readings below 30 "oversold". These thresholds are meant to flag when a move may have stretched far in one direction relative to its recent history.
The classic misunderstanding
The biggest mistake beginners make is treating "overbought" as an instruction to sell and "oversold" as an instruction to buy. It is not. In a strong trend, the RSI can stay overbought or oversold for a long time while price keeps going, and selling every overbought reading in an uptrend is a reliable way to lose money.
Overbought simply means momentum has been strong, which in a healthy trend is normal and can persist. The RSI describes momentum; it does not know when a move will end. Fighting a trend because an indicator looks stretched ignores that the market can stay stretched far longer than your account can survive.
A more grounded use
Some traders use the RSI for divergence — when price makes a new high but the RSI does not, hinting that momentum is fading. This can add context, but divergences fail often, so they are a clue, not a signal to act on alone.
For a beginner, the honest advice is to use the RSI as one small piece of context about momentum, always alongside a stop-loss and sensible sizing, and never as a standalone reason to enter. No single indicator, RSI included, contains a hidden edge — if one did, it would already be arbitraged away.