The Relative Strength Index, also known as RSI for short, is a momentum oscillator developed by a pioneer in the field of technical analysis, Mr. Welles Wilder.

RSI is a bounded oscillator, meaning that two horizontal lines, the 30 and the 70 lines in the oscillator window represent extreme levels.
More precisely, when the oscillator falls below the 30-level boundary, it is presumed that the attached financial instrument is oversold.
On the other hand, when prices rise above the 70-line, the market is then overbought.
This is a great advantage of the RSI and the other bounded oscillators, as the extreme markets are easily identified.
By the way, the Relative Strength Index is considered as one of the most popular oscillators!

With this in mind, let’s take a look at the signals generated by the RSI.
So, a confirming Buy signal is generated when the oscillator falls below the 30-line and then rises above it, while on the price chart, we spot an occurrence of a bullish reversal, either a candlestick pattern or a chart pattern.
Similarly, a Sell signal is generated when the oscillator rises above the 70-line and then falls below it, while on the price chart, we spot an occurrence of a bearish reversal, either a candlestick pattern or a chart pattern.
Now, failure swing at the RSI extreme levels as well as divergence between the price and the oscillator, do generate strong signals, but I will like to revisit these topics in every detail at a later stage.