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Mean reversion
When RSI reaches 70 or 30, does price turn around?
RSI overbought and oversold · RSI extremes
What it bets
After a rise or a fall becomes extreme in speed, a correction the other way follows.
How the rule is written
Wilder's relative strength index measures how large the gains are relative to the losses inside a window. By habit, above 70 is called overbought and below 30 oversold. The trade fades that reading and exits near 50. 70 and 30 are a habit, not the definition of the indicator.
When it fails
In a strong trend, RSI can sit above 70 for a long time. Shorting the moment it hits 70 means standing against the trend when the trend is strongest.
Do not confuse it with
RSI(2) uses a very short period, and it usually also requires that a longer trend is still up. It bets on a pullback inside a trend, not on a reversal of a range. KDJ measures where price sits inside the recent high-low range, not the ratio of gains to losses.