one of the applications of RSINucleus Software Exports LimitedNSE:NUCLEUSanujologyRSI as an indicator can be used in several ways , RSI is almost mirror image of the price , if we convert a candle stick chart into a line chart , and we hide which is RSI plotting and which is price plotting , it is difficult to identify which one is which... But there are times where RSI due to it formula creates divergence and confluences with prices, and there are many articles and tutorials to explain those aspects of RSI Motive of this article : To see RSI as tool for range bound trading , and shape our next trade ideas using this possibility . After working with RSI extensively , all what I can say is RSI can be treated almost similar with all the treatments which we can have over the price chart , for example : we can apply head & shoulders / cup&handle etc ... concept(s) on rsi ditto same as we do on price chart. so decoding RSI isn't just limited to divergences ... One of such use-cases which I have been using about RSI is in range-bound trading, if we can have a price range or a parallel channel , you can observe that either price goes side-ways or gets reversed as per the RSI in the respective timeframe ... here we are taking two channels ( a channel within a channel ) 1w candles , and 1D candles .. and you can see RSI going from 30 to 70 to 30 to 70 , all alongwith the boundaries of the price range in either 1w or 1d channels ... Just two images and it is clearly visible what we are discussing here , 1w candles : see the candles having a range of channel and rsi also behaving in same way between 70-30 levels : 1d candles : see the candles having a range of channel and rsi also behaving in same way between 70-30 levels : So the whole logic over here is , if in case we can make out a range bound behaviour , or a price range in channels , then we can align our next trade idea in accordance with the RSI behaviour i.e. if it is around 70 levels in 1D timeframe , then we can try to observe if there is any chart pattern or price action which is showing a sell side trade ... and if it is around 30 levels in 1D timeframe , then we can try to observe if there a buy side trade based on price action / or chart patterns . . . same goes with 1W candles .... ( I am not focussing on 1M because it becomes very much slow process and we always have lots of scrips to trade with on D and W basis .. so omitting it for M candles ... but i am much much sure this can work with M candles as well ... ) Now one of the aspect is to check whether there is an alignment of RSI on both timeframes D & W , if both time frames are having rsi around 30 , and the prices are range bound in both timeframes ... we can have a much much high conviction on buy-side or the trade .... And at last please note three things about RSI which i have observed and discovered while talking with lots of fellow trades .... 1) RSI follows CLOSE prices , and not the wicks ( high and low ) so while detecting divergences consider the close price and now the high or low .. 2) RSI hitting 70 is not an assurance of prices reversing , it can either reverse or just go side-ways .... RSI at any level 70 or 30 is not an guarantee of " Price reversal " 3) RSI can remain above 70 for a much much time period than usual expectation, and RSI can remain below 30 for much much time ... there are index charts which shows this ... Bonus point : read some where from a veteran of the market , prices can remain irrational for a longer period of time , just make sure you remain solvent till then ... happy investing and joyful trading wishes to all