RSI compares the average size of recent up-moves to recent down-moves over a lookback period (commonly 14 bars, though zengtrade's fast mean-reversion strategy uses a much shorter 2-bar window), scaled to 0-100. Readings above roughly 70 are traditionally read as "overbought," below roughly 30 as "oversold," though what actually counts as extreme is regime- and asset-dependent.
RSI is a reversion signal, not a trend signal. A strategy buying "RSI oversold" is betting the recent stretch snaps back toward the mean, which only works reliably inside a broader uptrend. Buying every oversold reading in a genuine downtrend just buys every leg down.
zengtrade's RSI-based strategies pair the RSI trigger with a trend filter for exactly this reason: RSI decides timing, the trend filter decides whether reversion is even the right bet to make right now.
Educational content, not investment advice. zengtrade is paper-first and non-custodial.