The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of recent price changes on a scale from 0 to 100. An RSI above 70 is considered overbought (potential sell signal), and below 30 is considered oversold (potential buy signal). RSI is one of the most widely used technical indicators, often combined with trend analysis and support/resistance levels for confirmation.
The daily RSI on GBP/USD drops to 25, indicating oversold conditions. You look for a bullish candlestick pattern near a known support level and enter a long position. The RSI then climbs back above 30, confirming the reversal.
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