Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a technical analysis indicator that measures the speed and magnitude of recent price movements. It is used to evaluate momentum by comparing recent gains to recent losses, helping traders infer whether an asset’s move is strengthening or weakening.

RSI is plotted as a line that oscillates between 0 and 100, commonly calculated over 14 periods (for example, 14 candles on a chart). When buying pressure has dominated recent periods, RSI rises; when selling pressure has dominated, RSI falls. In practice, traders often interpret readings above 70 as “overbought” and below 30 as “oversold,” meaning the market may be stretched relative to its recent average behavior. These levels are guidelines, not guarantees, because strong trends in crypto can keep RSI elevated or depressed for extended periods.

RSI is frequently used to spot momentum shifts. One common approach is watching for RSI to cross above or below key thresholds, suggesting improving or deteriorating momentum. Another widely used concept is divergence, when price makes a new high but RSI fails to do the same, or price makes a new low while RSI improves. In crypto trading, this can appear during fast rallies or sharp selloffs, where price continues moving but the underlying momentum starts to fade. Many traders also combine RSI with trend tools like moving averages or support and resistance to avoid acting on RSI alone.