RSI on M1: overbought doesn't mean reversal

[FXS London Scalper]

RSI above 70 is often read as "overbought, sell". On M1 during a strong London move, RSI can stay above 70 for a long time while price keeps rising.

How RSI is better used for scalping:

• As a momentum gauge: RSI staying high confirms a strong move, not a reversal.
• Divergence at a key level: price makes a new high, RSI doesn't, at yesterday's high or a round number. Still not a signal on its own.
• As a filter: avoid shorts when RSI on M5 is above 60.

A worked example of the trap: EURUSD breaks the Asian high at 08:05, RSI on M1 hits 75. A short on "overbought" at 08:06 gets stopped as price continues 15 pips.

To check your own use: tag trades taken on RSI extremes and compare with others. Counter-trend RSI trades on M1 often have a low hit rate during London.

Short trades against momentum on M1 tend to need very tight stops, which makes costs a large share of the risk.

How do you use RSI, if at all?