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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

Force Index

The Force Index combines price change and volume into a single oscillator that measures the power behind each market move — positive force indicates buying pressure and negative force indicates selling pressure. Developed by Alexander Elder, it is a core component of the Elder trading system used across <a href="/market/stocks" class="text-primary hover:underline">stocks</a> and <a href="/market/forex" class="text-primary hover:underline">forex</a>. Pair it with the <a href="/academy/indicators/exponential-moving-average" class="text-primary hover:underline">EMA</a> for trend context and browse our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> for more volume-momentum hybrids.

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.

Stochastic RSI (StochRSI)

Stochastic RSI applies the <a href="/academy/indicators/stochastic-oscillator" class="text-primary hover:underline">Stochastic Oscillator</a> formula to <a href="/academy/indicators/rsi" class="text-primary hover:underline">RSI</a> values instead of raw price, creating an oscillator of an oscillator that is extremely sensitive to momentum shifts. It is a favourite tool of <a href="/market/crypto" class="text-primary hover:underline">crypto</a> traders who need early reversal signals on short timeframes. Pair StochRSI with price structure and volume confirmation from our <a href="/academy/indicators" class="text-primary hover:underline">indicator guide library</a> to filter out the inevitable noise.

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>.

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