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.