I want to talk a little about RSI because lately I’ve observed that many traders are using this indicator incorrectly.

RSI is fundamentally a momentum indicator that moves between 0 and 100 and shows whether an asset is overbought or oversold. Its calculation is based on the asset’s recent closing prices, and generally, a reading below 30 indicates a potential decline, while above 70 suggests upward potential. But there is a very important point to pay attention to here.

Real strength lies in recognizing divergences such as negative RSI divergence. For example, if the price makes a new high but RSI does not follow and stays at a lower level—that is negative divergence. This situation often signals a potential reversal and can be a warning of a trend change. Conversely, when the price drops but RSI remains high, this is called positive divergence and may indicate upward potential.

My observation is this: most people use RSI alone and then get disappointed. When you evaluate negative RSI divergence or other divergences together with other technical analysis tools, you get much more reliable signals. You should consider factors like price movements, support and resistance levels, and chart patterns.

In conclusion, RSI is a powerful tool but has its limitations. If you can interpret divergences correctly, you can spot potential turning points in the market earlier. However, relying on a single indicator is risky—you always need to see the bigger picture.