RSI Overbought & Oversold Levels
RSI indicator values of above 70 are regarded and considered to be over-bought: Index traders consider points and levels above the 70 level as market tops & good points for taking and booking profits.
RSI technical indicator values of below 30 are considered to be oversold: Index traders consider points and levels below the 30 level mark as market bottoms & good points for taking and booking profits.
These overbought and oversold Indices levels should be confirmed by RSI center line crossovers signals. If these regions give a market top or bottom, this trading signal should be confirmed using the RSI center line cross-over signal. This is because these over-bought & over-sold levels are prone to giving whip-saws in the market.
In the illustration put on display below, when the RSI hit 70, it showed that the market trend was overbought, & this could be considered and interpreted as a signal the trend could reverse.
The market trend then reversed the trend after a short while & started to move downward, until it got to the over-sold levels. This was considered a Indices market bottom after which the market trend started to move upward again.
Overbought & Oversold Levels - RSI Trading Strategies
Over Extended Overbought & Oversold Levels
When the market is trending strongly upward or downwards the RSI indicator will stay at these overbought and oversold levels for a long time. When this happens these over-bought & oversold regions can not be used as market tops & market bottoms because the RSI indicator will stay at these levels for an extended period of time. This is the reason why we say the over-bought & over-sold regions are prone to Index whipsaws & it's best to confirm these signals using RSI center line cross-over strategy.
Over Extended Overbought & Oversold Levels - RSI Trading Indicator Strategy
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