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RSI is overbought but the price is still skyrocketing? Why do you always get liquidated when trying to "stand in front of the train" like that?

Have you ever seen a coin surge parabolically, with the RSI shooting into the overbought zone of 80 or 90? At that moment, do you excitedly open a Short position because you think, "It’s overbought; it has to crash eventually"?

And what was the result? The coin didn’t drop; it even increased sharply while the RSI was already overbought, leaving you stranded with an empty account and a thousand disappointments.

In reality, you aren't wrong; you are just applying your knowledge too mechanically.

I will help you understand the true nature of RSI and how to apply it correctly, because I used to be just like you 😭
1/ The True Nature of RSI
RSI is an indicator used to measure the strength of a trend. The higher the RSI, the stronger the trend, proving that the buyers are dominating the sellers. At this point, sellers do not hold the advantage; on the contrary, they have become the weaker side.
As you can see below, at an RSI level of 66.6, Buyers are double the Sellers. At the 75 mark, this ratio is 3 Buyers vs. 1 Seller, and similarly, at the 80 mark, it is 4/1, and at the 90 mark, it is 10/1.
Therefore, Shorting when RSI is overbought means you are fighting against an extremely strong trend with buying pressure 3 to 10 times greater than selling pressure. Your win rate in this case is very small.

Example:

With RIVER, this coin has continuously stayed in the overbought zone for over a month without any significant correction. Thus, SHORTING RIVER means you are struggling against a volume of Buyers 3 to 10 times larger; the chance of winning is almost zero and the risk is extremely high.

2/ What to do when RSI is overbought?
To ensure you never become "liquidity" for others when using RSI, you must follow one rule: Follow The Trend, don't choose to confront ( or face-again ) it.
Once you have identified that this is an uptrend on a higher timeframe, you should choose to follow that upward wave by Buying during Pullbacks on smaller timeframes.
For Example:

A coin will always have corrections on the M5 / M15 timeframes after "overheating." The purpose of this is to reset the RSI back to normal and shake out the Long positions.
You don't need to buy the peak or FOMO; just wait for clear signals after corrections on smaller timeframes to enter a trade. That is the least risky way.
I usually combine this with Price Action and EMA lines to most accurately determine the timing to buy. If you have followed me long enough, you are probably no stranger to my EMA21 combined with RSI.

I hope this article helps you. If you find it useful, please give me a like and a comment to give me the motivation to keep sharing🤭