---
title: 'You''re Using The RSI WRONG...'
source: 'https://youtube.com/watch?v=NT_qg2qPR1c'
video_id: 'NT_qg2qPR1c'
date: 2026-08-19
duration_sec: 490
channel: 'TradingLab'
---

# You're Using The RSI WRONG...

> Source: [You're Using The RSI WRONG...](https://youtube.com/watch?v=NT_qg2qPR1c)

## Summary

The video explains that the RSI (Relative Strength Index) is one of the most popular trading indicators, but 99% of traders use it incorrectly by relying on default overbought/oversold levels (70/30) for mean reversion, which often leads to false signals. The creator demonstrates a more effective approach: adjusting the RSI settings to 80/20, confirming signals across multiple timeframes, and using price action for entry confirmation. Additionally, the video reveals the RSI's original purpose—measuring strength to identify pullbacks in trending markets—and provides a practical strategy for trading these pullbacks.

### Key Points

- **Common Misuse of RSI** [00:15] — Most traders use RSI to find overbought and oversold areas (70/30), but this often fails because oversold can get more oversold, leading to false signals.
- **False Signals with Default Settings** [02:01] — Using the default RSI settings on a chart gave 5 signals, 4 of which were losing trades, highlighting the need to filter signals.
- **Adjusting RSI Settings** [03:19] — Change the overbought/oversold levels from 70/30 to 80/20 to reduce the number of signals but increase their strength and reliability.
- **Multi-Timeframe Confirmation** [03:35] — Confirm RSI signals on higher timeframes (e.g., daily) before entering trades; if no confirmation, skip the trade.
- **Applying the Strategy** [04:03] — On a 1-minute chart, a parabolic move with RSI in oversold suggests a short, but confirmation on 5-minute and 15-minute charts is needed before entering.
- **Price Action Confirmation** [05:12] — Add price action confirmation like a double bar break (two candles showing hesitation, then price breaks the low) to increase trade quality. Enter immediately on the break, not waiting for candle close.
- **Trade Management** [05:54] — Set stop loss above the break bar. Take partial profits (e.g., 50%) when RSI returns to the mid-line, and use VWAP for additional profit targets.
- **RSI's Original Purpose** [06:26] — RSI was designed to measure strength, not just overbought/oversold. In strong trends, RSI lives between 50 and 80 (upper quadrant) and bounces off the mid-line.
- **Pullback Strategy** [07:01] — For uptrends, wait for price to pull back to the RSI mid-line and enter expecting a bounce. For downtrends, wait for RSI to hit the mid-line in the lower quadrant and short. This works only in trending markets, not sideways.
- **Combine with Price Action** [07:42] — The pullback strategy should be combined with price action strategies for best results, as the creator promises to teach in a follow-up video.

### Conclusion

The RSI is a versatile indicator that, when used correctly—with adjusted settings, multi-timeframe confirmation, and price action—can significantly improve trade quality. The key is to understand its original purpose as a strength indicator and apply it to trending markets for pullback entries.

## Transcript

The RSI Or, if you re fancy, the relative strength index. &nbsp; The rsi is one of the most popular&nbsp; trading indicators out there. &nbsp; If you even have the slightest clue about&nbsp; trading, you have heard about this indicator. &nbsp;
Books, websites, videos, there s tons of&nbsp; information about this one specific indicator. &nbsp; But with that said, 99% of people are actually&nbsp; using this indicator completely wrong. &nbsp;
For example, If I could guess correctly&nbsp; you probably have used the rsi for finding&nbsp;&nbsp; overbought and oversold areas. The lower line being oversold and&nbsp;&nbsp; the upper line being overbought. Now if you ve actually used it like&nbsp;&nbsp;
this you probably quickly figured out&nbsp; that sure it works sometimes but half&nbsp;&nbsp; the time it doesn t work very well at all. But what if I told you, this is the completely&nbsp;&nbsp; wrong way to use this indicator. And what if I also told you the&nbsp;&nbsp;
default settings for the rsi that everybody&nbsp; uses are actually not the best settings. &nbsp; Well, im going to show you how to ACTUALLY use&nbsp; this indicator correctly and ill also go over&nbsp;&nbsp; Okay, so the rsi indicator measures strength. After all, its call the relative strength index. &nbsp;
This indicator is a momentum oscillator. It&nbsp; measures the speed and change over a set number&nbsp;&nbsp; of bars and it oscillates between 0 and 100. So heres the problem most traders have. &nbsp;
They plop the rsi on their chart and&nbsp; use it for mean reversion strategies.&nbsp;&nbsp; For example, overbought and oversold. So if the rsi went like this. The normal&nbsp;&nbsp; average trader would consider this oversold.&nbsp; So they would enter into a long position here. &nbsp;
But just because something is quote&nbsp; on quote oversold that doesn t mean&nbsp;&nbsp; it can get more oversold. So there s an obvious flaw in&nbsp;&nbsp; wrong. We just have to perfect it. So here s the rsi chart and you can see if&nbsp;&nbsp;
we are doing with the original style of thinking.&nbsp; It gave us 5 signals and if you look closely 4 of&nbsp;&nbsp; these 5 signals were losing trades. Now, every indicator ever is&nbsp;&nbsp; going to provide false signals. That s just how the world works. &nbsp;
I know, its very sad. But our goals is to just&nbsp; limit those false signals so we don t get AS&nbsp;&nbsp; many so it provides more winning signals. A way I found to do this with the rsi is&nbsp;&nbsp; But before we go over that, let me&nbsp; show you this site called fyntura. &nbsp;
Fyntura is a forex and crypto broker,&nbsp; but damn, its good one at that. &nbsp; First of all they don t have&nbsp; kyc requirement. Which is nice. &nbsp; Even if you re on an island with a&nbsp; volleyball, you can use fyntura. &nbsp;
They also have extremely low commissions and&nbsp; spreads so you re not wasting money like you&nbsp;&nbsp; they have a 100% deposit bonus. All you have to do is use the link in my&nbsp;&nbsp;
description, and if it s your first time signing&nbsp; up they will match whatever you first deposit. &nbsp; Yeah, I know, its literally free money. Go create an account with them if you trade&nbsp;&nbsp; crypto or forex. At the very least get&nbsp; the deposit bonus and see if you like it. &nbsp;
Okay back to the video. To do this go to the settings of the rsi. &nbsp; Now the default settings are 70 30 for&nbsp; the overbought and oversold areas. &nbsp; I like to change these numbers to 80 20.&nbsp; Doing this will give us less signals but&nbsp;&nbsp;
these signals we do have our going to be&nbsp; stronger and less likely to be wrong. &nbsp; The next step I like to do is confirm&nbsp; these signals with mutltiple timeframes. &nbsp; For example, here this chart on the&nbsp; hourly time frame gave us 2 signals. &nbsp;
So were going to also check the rsi on the daily&nbsp; time frame and see what the signals are on that. &nbsp; As you can see here, we have 0 signals. So we wouldn t enter any of these&nbsp;&nbsp; trades because we don t have any&nbsp; confirmation on the higher timeframe. &nbsp;
So now that we have created a process&nbsp; to raise the quality of these signals,&nbsp;&nbsp; how can we use this to spot some great trades? So here we are on the 1 minute time frame and&nbsp;&nbsp; the does a parabolic move upwards and the rsi&nbsp; goes in the oversold area. A good sign to enter&nbsp;&nbsp;
a short. But then we do what we were talking&nbsp; about earlier and go to next highest timeframe.&nbsp;&nbsp; The 5 minute. Here, the rsi has not reached&nbsp; the oversold area yet. So we wait some more. &nbsp;
and continues to head upwards. So&nbsp; good thing we waited on the short. &nbsp; Price then hits the oversold area again.&nbsp; We then check the 5 minute and this time,&nbsp;&nbsp;
the rsi in the oversold area on the 5&nbsp; minute. So that s good confirmation. &nbsp; For good measure, we check the 15 minute&nbsp; as well and it also in the oversold area. &nbsp;
So these are all good signs to enter a short. But just because the rsi is providing signals&nbsp;&nbsp; to enters a short on multiple timeframes doesn t&nbsp; quite mean its time to enter yet. We still need&nbsp;&nbsp; some more confirmation on this trade to raise&nbsp; our odds of entering in good quality trade. &nbsp;
A nice way to do this is to add&nbsp; some price action confirmation. &nbsp; Here the chart does a double bar break.&nbsp; Meaning there are two candles here showing&nbsp;&nbsp; signs of hesitation. Then price breaks the&nbsp; low of both these bars to the downside. &nbsp;
Also as a side note, I do not wait for the close&nbsp; of this candle. We already have the confirmation.&nbsp;&nbsp; We just need price to break the low of these 2&nbsp; candles. Once it does, we enter immediately. &nbsp;
AS the cherry top right when this break happens,&nbsp; the rsi returns back to normal. So now instead&nbsp;&nbsp; of being overbought it return to the middle&nbsp; zone. Which is also a bearish indication. &nbsp; What I like to do is set my stop loss right above&nbsp; this bar. Now you can use your take profit in&nbsp;&nbsp;
multiple ways. I personally like to do this. Go to your indicators tab and the vwap. &nbsp; The vwap on our chart is right here. So what I do is ill take partial profits&nbsp;&nbsp; say 50% of my trade when price comes back to the&nbsp; mid line of the rsi. So right here, I would have&nbsp;&nbsp;
taken partial profits because the rsi returned&nbsp; to the mid line. Then I would take the rest of&nbsp;&nbsp; But this isn t actually my&nbsp; favorite way to use it. &nbsp; The rsi actually wasn t made&nbsp; for finding overbought and&nbsp;&nbsp;
oversold areas like how everyone uses it. It was actually made as a way to find strength. &nbsp; As the name suggests. Relative STRENGTH index. So you can usually the rsi for bullbacks. &nbsp; Now when I started to use the rsi, I&nbsp; started to notice on very strong trends,&nbsp;&nbsp;
the rsi would just live between 50 and 80. If the chart was strong the rsi would live&nbsp;&nbsp; in this upper quadrant and just bounce&nbsp; from the mid line to the upper line. &nbsp; Now for this strategy to work.&nbsp; The chart needs to be trending. &nbsp;
If the chart is moving sideways like&nbsp; this, this strategy will not work. &nbsp; We need a chart that is trending like this. While the price is going up. Make sure its&nbsp;&nbsp; living in this upper quadrant. We then want price to come down&nbsp;&nbsp;
to this mid line on the rsi. Once it does, we can enter the&nbsp;&nbsp; trade expecting this to be a pullback and&nbsp; for price to bounce off this mid line. &nbsp; And as you can see it works beautifully. Same thing with shorting. &nbsp;
You want to find a strong downtrend and you want&nbsp; the rsi to be living in the lower quadrant. &nbsp; Wait for the rsi to hit the mid line Enter the trade expecting this to be a pull back. &nbsp; And boom, you have a glorious short trade. Just like the other strategy though,&nbsp;&nbsp;
you shouldn t use this strategy just by itself. What I found, is if you incorporate some price&nbsp;&nbsp; rsi by watching this video. Next im going to show you some&nbsp;&nbsp; price action strategies you can use&nbsp; to pair with these rsi strategies. &nbsp;
If you do both what im about&nbsp; to teach you in this video AND&nbsp;&nbsp; combine it with these rsi strategies. You re trading profits will skyrocket. &nbsp; Thanks for watching and ill&nbsp; see you guys next time.