Everyone Uses RSI Wrong
RSI is over 70. Time to short?
If you asked me which indicator has created more losing traders than any other, I would answer:
RSI.
Not because RSI is useless. In reality, it is one of the most powerful momentum indicators available.
The problem is that almost everyone uses it the same way:
“RSI is above 70, sell.”
“RSI is below 30, buy.”
And this simple interpretation has destroyed more trading accounts than most people realize.
The reality is very different.
The biggest advantage of RSI is something almost nobody talks about:
Bullish and bearish divergences.
This is where RSI becomes truly powerful.
My goal with this article is to make you fluent in RSI.
Not just someone who knows that “70 means overbought.”
I want you to understand RSI so well that you could sit next to your neighbor and explain why Bitcoin went down in June and jumped up in July.
RSI does not predict
RSI measures the speed and magnitude of recent price movements.
Think of it like the accelerator pedal in a car.
RSI above 70 = buyers are aggressively pressing the accelerator.
RSI below 30 = sellers are aggressively pressing the accelerator.
Notice what I did not say:
“RSI above 70 means sell.”
Because that is not what RSI actually tells you.
And this is the biggest misconception spreading across social media.
The entire trading world learns this simple formula:
RSI above 70 → Sell
RSI below 30 → Buy
But if this worked even 50% of the time, everyone following this rule would become rich.
Unfortunately, markets are not that simple.
Take a look at the Gold chart from the late 1990s and early 2000s.
This is one of the best examples of why RSI is misunderstood.
On February 3rd, 1997, Gold’s RSI dropped to 13.
That was an extreme reading.
The price had already fallen 18% from the previous year, and many investors started thinking:
“This must be the bottom.”
It looked like the perfect buying opportunity.
But if you bought there, you would have spent the next five years holding a losing position.
At one point, your investment would have been down approximately 26%.
The interesting part?
The real bottom came later.
Gold bottomed in 1999 and retested that area again in 2001.
At that moment, RSI was only around 38.
Then something amazing happened.
Gold started a massive rally.
Over the next decade, it gained more than 600%.
If you trusted RSI alone, you would have not only held a losing position...
you would have missed the real bottom.
But RSI above 70 means Sell, right?
Wrong.
This is where most traders completely misunderstand momentum.
When RSI moves above 70, it does not show weakness.
It shows strength.
The first time Tesla’s RSI moved above 70 was in July 2020, when TSLA broke above $80.
That was a new all-time high.
Every Tesla holder was profitable.
Sure, you could have sold there.
But you would have missed another 258% upside during the same year.
Tesla eventually reached $300 before experiencing a meaningful correction.
During that entire move, RSI never dropped below 30.
It only touched 39 once.
RSI went above 70 three more times.
And each time, it marked the beginning of another powerful move higher.
If you sold the second RSI breakout above 70, you would have missed 133% of potential upside.
Then another 66%.
Then another 20% after the final breakout.
In other words:
The correct action was the exact opposite of conventional wisdom.
You should not have sold.
You should have understood the strength.
Think about RSI as a runner.
The faster the runner moves, the higher RSI goes.
Would you look at a professional athlete running at full speed and say:
“He is running too fast. He must immediately stop.”
No.
You would say:
“He is strong.”
Markets work the same way.
Persistent high RSI usually means something important:
Strong buyers are dominating the market.
And during bull markets, that is exactly what you want to see.
So how do I actually make money with RSI?
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