RSI Overbought and Oversold Zones
Learn about the traditional RSI overbought and oversold zones, their standard levels, and why they can be adjusted.
- 7 min read
- For beginners
- Educational
- Pelajaran 3 dari 6
This lesson explores the traditional overbought and oversold zones associated with RSI, building on the 0–100 scale covered in the previous lesson.
The standard levels described in this lesson have been verified against multiple sources, including the indicator's original developer's guidelines.
The Traditional Overbought and Oversold Levels
Traditionally, RSI readings above 70 are considered overbought, and readings below 30 are considered oversold, following levels originally proposed by RSI's developer. These are the most widely referenced default thresholds across trading platforms and technical analysis education.
What Overbought and Oversold Are Commonly Discussed as Suggesting
An overbought reading (above 70) is commonly discussed as suggesting that recent upward momentum has been particularly strong, potentially reflecting a market that has moved significantly and rapidly higher. An oversold reading (below 30) is commonly discussed as suggesting the opposite — particularly strong recent downward momentum.
These Levels Can Be Adjusted
The 70/30 levels are widely used defaults, not fixed, immutable rules. Some technical analysis education discusses adjusting these levels — for example, using 80/20 — for instruments or conditions where price repeatedly reaches the standard 70/30 levels without a corresponding reversal, an adjustment some traders make to better calibrate the zones to that specific instrument's typical behaviour.
Overbought and Oversold Are Not, By Themselves, Reversal Guarantees
It's important to understand that reaching an overbought or oversold reading does not, by itself, guarantee that a reversal is imminent. This is explored in much greater depth in this unit's discussion of RSI in trending markets and the final lesson on why overbought does not automatically mean sell.
Summary
RSI readings above 70 are traditionally considered overbought and readings below 30 oversold, reflecting particularly strong recent upward or downward momentum respectively, though these are widely used defaults that can be adjusted (such as to 80/20) for specific instruments. Reaching these levels does not, by itself, guarantee a reversal is imminent, a nuance explored in much greater depth later in this unit.
Frequently Asked Questions
Readings above 70 are traditionally considered overbought.
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