Unit 1 · Level 3 · Indicators
RSI: the speedometer
RSI measures how fast and hard price has been moving, on a 0–100 scale. Above 70 it reads 'overbought', meaning the move has been unusually strong. Below 30 it reads 'oversold', unusually weak. It's a speedometer for momentum, not a buy/sell machine.
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What this lesson covers
Divergence: RSI's best trick
When price makes a NEW high but RSI makes a LOWER high, momentum is quietly fading under the surface. That's bearish divergence. (Mirror version at lows: bullish divergence.) It doesn't time the turn, but it whispers 'this trend is getting tired'.
What you get asked
RSI reads 82. What does that literally mean?
'Overbought' describes the RECENT PAST's intensity. It is not a sell command. Strong trends can stay overbought for weeks.
The most expensive RSI mistake beginners make?
And getting steamrolled by strong trends. In a raging uptrend, RSI can sit above 70 for a month while price doubles. Overbought ≠ over. The context, meaning the trend, decides what the reading means.
Match the RSI reading to its trained interpretation
Same numbers, opposite meanings depending on structure. The indicator is the adjective; the level is the noun.
Price prints a new high at $120; RSI peaks lower than at the $110 high. This is…
The engine is revving lower on each push. Combined with a resistance level, divergence is a real warning. Alone, it's a whisper, not a trade. 🐜
The rest of this unit
RSI, MACD, Bollinger Bands, and confluence: interrogating witnesses without obeying them.