I've been observing for a while how many traders still don't properly utilize the RSI, one of the most accessible yet most misunderstood technical indicators in the market.

Basically, the RSI is an oscillator that shows you the speed of price movements on a scale from 0 to 100. J. Welles Wilder created it in 1978, and since then it has become an essential tool for anyone analyzing charts. The idea is simple: when the RSI indicator rises above 70, you're in overbought territory, which could indicate a downward correction. When it falls below 30, it enters oversold territory, suggesting possible buying opportunities.

Now, most people make the same mistake: taking these levels as absolute truths. The RSI can stay in overbought for weeks in a strong bullish market, so if you only rely on it, you'll end up with many false signals. That's why I always say this indicator works best when combined with others, like Bollinger Bands or moving averages.

What's interesting is working with divergences. When you see the price dropping but the RSI rising, that's a bullish divergence and may indicate that the downtrend is losing strength. Conversely, if the price makes higher highs but the RSI makes lower lows, the rally is probably coming to an end.

Some traders also adjust the RSI period depending on what they trade. Instead of the typical 14 days, some use 9 or 21 depending on the asset's volatility. There are even more sophisticated versions like the stochastic RSI that combine additional techniques for deeper analysis.

The weak point of the RSI indicator is that it generates delays, especially in markets with strong trends, and it can give false signals if not validated with other tools. It’s not magic; it’s just a piece of the puzzle.

My advice: use RSI as part of your overall strategy, not as your only compass. Combine it, validate its signals with other indicators, and above all, respect your risk management. That’s what separates traders who last from those who disappear quickly.