π RSI Relative Strength Index
A momentum gauge that scores how fast and how strongly a price has moved recently on a 0 to 100 scale. It flags when a coin may be overbought (rallied too hard) or oversold (sold off too hard).
π The simple version β a speedometer for buying pressure
Think of RSI like the tachometer in a car. It does not tell you where you are going. It only tells you how hard the engine is working right now. A high RSI means buying pressure is redlining; a low RSI means it is idling. RSI does the same for price: it reads the momentum of a recent move, not the destination. That is why it is called a momentum oscillator β a single line that swings between 0 and 100, usually drawn in a strip below the price chart.
π’ How the number gets made
RSI compares recent average gains to recent average losses over a lookback window. The standard default is 14 periods β 14 days on a daily chart, 14 hours on an hourly chart, and so on. If gains have heavily outweighed losses lately, RSI rises toward 100. If losses dominate, it falls toward 0. You almost never calculate it by hand; charts plot it for you with one click.
| RSI reading | Traditional meaning |
|---|---|
| π₯ Above 70 | Overbought β upward momentum may be overextended |
| π Roughly 30β70 | Neutral β no strong momentum extreme |
| π± Below 30 | Oversold β selling pressure may be running out |
π In strong, fast-moving trends some traders widen the lines to 80/20 or even 90/10, because a hot market can stay "stretched" far longer than usual.
π Divergence β RSI's most useful tell
The signal many traders watch most closely is divergence: the price makes a new high or low, but RSI refuses to confirm it. Say price prints a higher high while RSI prints a lower high β that gap hints the move is running out of fuel and a reversal could be coming. It is not a guarantee, but it is one of the clearest stories RSI tells.
π± Where a beginner meets RSI
RSI is one of the most popular momentum indicators in technical analysis, and you will bump into it fast. It is a default one-click indicator on TradingView and on exchange charts, and it shows up constantly in crypto chat ("BTC RSI is overbought"). Because crypto is so volatile, RSI swings to extremes often, which makes the overbought/oversold framing especially loud for newcomers β and easy to over-trust.
π§ Origin
RSI was developed by J. Welles Wilder and introduced in 1978 in his book New Concepts in Technical Trading Systems. It started life in traditional markets long before crypto existed, and the same 14-period default has carried over to nearly every charting tool today.
π¨ Things beginners should know
- π« Overbought β sell β In a strong trend RSI can stay above 70 for a long time while price keeps rising
- π False signals in flat markets β In quiet, sideways, or low-volume conditions RSI can flip back and forth and mislead you
- 𧩠It works best with company β Combine it with trend, volume, and support/resistance instead of trading it alone
- β οΈ Misreading momentum costs more with leverage β Acting on a single RSI reading is far riskier when you are using leverage
β FAQ
- Does RSI above 70 mean sell and below 30 mean buy?
- No. Overbought and oversold are not automatic trade signals. In a strong trend RSI can sit above 70 (or below 30) for a long stretch while the price keeps moving, so selling the instant it hits 70 often means exiting too early. Treat it as a context clue, not a command.
- What does the 14 in RSI mean?
- 14 is the default lookback window, meaning RSI compares the average gains and average losses over the last 14 periods. On a daily chart that is 14 days; on an hourly chart it is 14 hours. It is the standard setting most charts use out of the box.
- What is RSI divergence?
- Divergence is when the price makes a new high or low but RSI does not follow it. For example, price prints a higher high while RSI prints a lower high. Many traders see this gap as one of RSI's most useful hints that momentum is fading and a reversal may be near.