Relative Strength Index (RSI)
Last updated
Last updated
The Relative Strength Index (RSI) is a momentum oscillator — it measures how quickly and strongly price moves by comparing recent gains and losses.
In simple words: RSI tells you if an asset is overbought or oversold, helping you spot potential reversals or trend continuations.
RSI fluctuates between 0 and 100 and is usually shown as a line under the main price chart. The two most common levels to watch are:
70 and above → Overbought (price may reverse downward)
30 and below → Oversold (price may bounce upward)
💡 Default setting: RSI is typically calculated using the last 14 periods — this could be 14 days, hours, or candles, depending on your chart’s timeframe.
RSI doesn’t tell you exactly when to buy or sell — instead, it gives context. Just because something is “overbought” doesn’t mean it must fall. But it does signal that the move might be stretched.
Let’s say you’re looking at a coin’s chart and you notice RSI rising above 70. That doesn’t mean you should sell immediately — but it’s a clue that the bullish momentum is heating up and may cool down soon.
On the flip side, if RSI dips below 30, it suggests the asset is oversold and could be due for a bounce. This can be a signal to watch for a bullish reversal - especially if supported by strong candles or volume.
Here are some ways traders use RSI in real trading setups:
When RSI crosses above 70, consider looking for a pullback or short entry (especially if price is near resistance).
When RSI drops below 30, it may be time to watch for long setups or bounces.
Price makes a higher high, but RSI makes a lower high.
This shows weakening momentum — a potential warning that the uptrend is losing strength.
Price makes a lower low, but RSI makes a higher low.
This hints that selling pressure is weakening — a possible reversal setup.
RSI above 50 often signals bullish conditions.
RSI below 50 leans bearish.
Traders sometimes use 50 as a trend filter or confirmation signal.
Here’s a simple RSI-based trading approach:
Buy Setup: - RSI drops below 30 → then crosses back above 30 - Look for bullish candle confirmation - Place stop-loss below recent swing low
Sell Setup: - RSI rises above 70 → then crosses back below 70 - Confirm with a bearish candle - Stop-loss above recent swing high
You can also combine RSI with other tools like MA Cross, support/resistance zones, or volume spikes for stronger setups.
The default RSI setting is 14, which works well for many traders. But depending on your strategy and timeframe, you might adjust it:
9 or 7 RSI: More sensitive — good for scalping or fast intraday trades
21 or 28 RSI: Smoother — reduces noise, ideal for swing trades
There’s no “perfect” setting — test and tweak to fit your style.
Just like any indicator, RSI can mislead if used blindly. Here’s what to watch out for:
Assuming overbought = sell instantly: Assets can stay overbought or oversold for a long time during strong trends.
Ignoring trend direction: RSI is more reliable in context. In uptrends, oversold RSI is more meaningful. In downtrends, overbought RSI could be stronger.
Using RSI alone: Always look for confluence with other tools like candle patterns, trendlines, or key levels.
Pro tip: Combine RSI with a moving average or MA Cross to filter out bad signals.
RSI is a powerful yet beginner-friendly indicator that helps you understand market momentum. While it’s not a crystal ball, it adds depth to your analysis and helps time your trades more effectively.
Use RSI as a guide — not a standalone system. It shines best when combined with other signals and a clear trading plan.
Whether you’re spotting overbought setups on the 1D chart or watching for quick reversals on the 15-min frame, RSI deserves a spot in your trading toolbox.
