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Back to Indicators
MomentumLeading

RSI — Relative Strength Index

Overview

RSI measures the speed and magnitude of recent price changes on a 0-100 scale, identifying overbought and oversold conditions — it is one of the most widely used technical indicators in every market. RSI divergence signals are especially powerful when confirmed by the MACD or volume-based oscillators. Traders in crypto often widen the overbought/oversold thresholds to 80/20 due to higher volatility. Combine RSI with sound trading psychology to avoid chasing overbought entries in trending markets.

How It Works

RSI = 100 − [100 / (1 + RS)], where RS = average gain over N periods / average loss over N periods. The default period is 14. Values above 70 are overbought; below 30 are oversold.

Key Signals

  • RSI above 70 = overbought (potential reversal or pullback).
  • RSI below 30 = oversold (potential bounce or reversal).
  • RSI divergence (price makes new high but RSI doesn't) warns of trend exhaustion.
  • RSI failure swings provide high-probability reversal signals.

Common Mistakes

  • Blindly selling at RSI 70 in a strong uptrend — RSI can stay overbought for weeks.
  • Using RSI alone without price action or volume confirmation.
  • Not adjusting RSI levels for the market — crypto often uses 80/20 instead of 70/30.

More Momentum Indicators

TRIX

TRIX displays the percentage rate of change of a triple-smoothed <a href="/academy/indicators/exponential-moving-average" class="text-primary hover:underline">EMA</a>, filtering out insignificant price movements and highlighting only the most meaningful momentum shifts. It is valued by swing traders in <a href="/market/stocks" class="text-primary hover:underline">stocks</a> and <a href="/market/forex" class="text-primary hover:underline">forex</a> who want fewer but higher-quality signals. Browse our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> to pair TRIX with trend-following tools for a systematic approach.

DPO — Detrended Price Oscillator

The Detrended Price Oscillator strips out the long-term trend to isolate short-term price cycles, helping traders identify overbought and oversold conditions relative to recent behaviour rather than the dominant trend. DPO is ideal for cycle analysis in <a href="/market/stocks" class="text-primary hover:underline">stocks</a> and <a href="/market/forex" class="text-primary hover:underline">forex</a> where regular cyclical patterns exist. Use DPO alongside trend tools from our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> for context before acting on cycle signals.

Ultimate Oscillator

The Ultimate Oscillator blends buying pressure across three timeframes — short (7), medium (14), and long (28) — into a single reading, reducing the false signals that plague single-period oscillators. It is effective for spotting divergences in <a href="/market/crypto" class="text-primary hover:underline">crypto</a> and <a href="/market/stocks" class="text-primary hover:underline">stock</a> markets. Combine it with trend-following tools from our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> for a robust multi-timeframe <a href="/strategies" class="text-primary hover:underline">trading strategy</a>.

Stochastic Oscillator

The Stochastic Oscillator compares a security's closing price to its price range over a given period, making it excellent for identifying overbought/oversold conditions and divergences in bounded ranges. It works especially well alongside the <a href="/academy/indicators/rsi" class="text-primary hover:underline">RSI</a> for double confirmation of reversal zones in <a href="/market/forex" class="text-primary hover:underline">forex</a> and <a href="/market/stocks" class="text-primary hover:underline">stock</a> markets. For best results, use Stochastic signals only in the direction of the larger trend identified by tools in our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a>. Build it into a complete system by reviewing our <a href="/strategies" class="text-primary hover:underline">trading strategies</a> section.

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