Relative Strength Index (RSI) trading strategies use the RSI indicator to identify potential entry and exit points in financial markets. RSI is a momentum oscillator that measures the speed and magnitude of price movements on a scale from 0 to 100. Traditionally, a reading above 70 signals overbought conditions, suggesting a possible price pullback, while a reading below 30 indicates oversold conditions, hinting at a potential rebound.

One common strategy is the overbought/oversold reversal approach, where traders sell when RSI moves above 70 and buy when it drops below 30. Another is divergence trading, which occurs when the price moves in the opposite direction of the RSI. For example, if the price makes new highs but RSI does not, it may signal weakening momentum and a possible trend reversal.

RSI can also be used with trend-following strategies. Traders may look for RSI to remain in the 40–60 range to confirm trend strength, entering trades in the direction of the prevailing trend. Some adjust thresholds, using 80/20 instead of 70/30, to reduce false signals.

Successful RSI strategies often work best when combined with other tools such as moving averages or support and resistance levels, improving accuracy and reducing risk.