RSI
Definition
RSI (Relative Strength Index) is an oscillator that measures the speed and magnitude of price change and ranges from 0 to 100. Readings above 70 indicate overbought conditions, below 30 — oversold.
How to read RSI
The indicator is drawn as a separate line below the chart and moves between 0 and 100. It shows not the direction of price but its momentum — how fast and how strongly price has moved over the chosen period. When the upward move accelerates, RSI rises; when it fades, RSI falls, even if price is still near the top.
The classic layout relies on two levels — 70 and 30:
| RSI value | Zone | What it usually means |
|---|---|---|
| 70–100 | Overbought | buyers exhausted, a pullback down is possible |
| 30–70 | Neutral | balance of forces, no edge signals |
| 0–30 | Oversold | sellers exhausted, a bounce up is possible |
A trade example
EUR/USD on the M5 timeframe, RSI with a period of 14 drops to 22 — deep oversold: price fell too sharply. The trader does not enter immediately but waits for the first upward reversal candle as confirmation, and only then opens an "up" trade with an expiration of a few candles (5–15 minutes).
Why not enter right at 22? Because in a strong downtrend RSI can sit in the oversold zone for a long time while price keeps falling. The indicator value alone gives no trade — it is confirmed by a price reversal or a divergence (when price makes a new low but RSI does not; an early sign that the move is weakening).
RSI in the terminal
In Spectra Charts, RSI is added from the indicator catalog and placed on the chart as a separate panel with the standard period of 14. The 70 and 30 levels can be shifted to suit your style: on a calm market, narrow them to 65/35 for earlier signals; on a volatile one, widen them to 80/20 to cut out noise.
How it differs from the Stochastic
RSI and the Stochastic are both overbought/oversold oscillators, but they measure different things. RSI gauges the speed and magnitude of price change; the Stochastic gauges the position of the close relative to the price range over the period. In practice the Stochastic is faster and "twitchier," giving more signals; RSI is smoother and more resistant to noise. Many use them together: RSI for the overall momentum picture, the Stochastic for the precise entry moment.
Frequently asked questions
Which RSI period should I use?
The standard is 14 candles — it is the default, and the classic 70/30 levels are tuned for it. A shorter period (say, 7) gives more signals but more false ones; a longer one (21 and above) smooths out noise but reacts more slowly.
What does RSI above 70 mean?
The overbought zone: price has risen fast and buyers may be running out of steam. But it is not a direct sell signal — in a strong uptrend RSI can stay above 70 for a long time. Edge readings work as a signal only in a range and with confirmation.
Can I trade on RSI alone?
No. Overbought and oversold signals are reliable in a range, but in a trend they produce a series of false entries against the move. RSI is used together with a trend filter (such as a moving average) and confirmation — a candlestick reversal or a divergence.