Relative Strength Index (RSI) is a momentum indicator that calculates average price gains and losses over a given period of time (its default value is 14 periods). The RSI value, displayed on a scale from 0 to 100 as an oscillating line, gives out potential buy and sell signals the closer it gets to the extremes (0 or 100). When the RSI oscillator enters the Oversold area you should consider buying.
When the RSI oscillator enters the Overbought area you should consider selling.


Important : You need to take into consideration more factors when deciding if to buy/sell, not just the oversold/overbought RSI areas. In strong trends, the RSI oscillator might not even enter the oversold/overbought areas for prolonged periods of time, so keep that in mind when making decisions.


Some traders assign different values to the oversold/overbought areas to better fit their trading strategies. I am trading using an oversold area from 0 to 20 and an overbought area from 80 to 100.