RSI (Relative Strength Index)
Momentum oscillator measuring speed and change of price movements
What is RSI?
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of recent price changes to evaluate overvalued or undervalued conditions. Developed by J. Welles Wilder Jr. in 1978, it's one of the most popular technical indicators in cryptocurrency trading.
RSI oscillates between 0 and 100. Traditionally: ā¢ RSI above 70 indicates an asset may be overbought (potentially overvalued) ā¢ RSI below 30 indicates an asset may be oversold (potentially undervalued) ā¢ RSI around 50 suggests neutral momentum
In cryptocurrency markets, these levels may vary due to higher volatility - some traders use 80/20 or 75/25 instead.
Formula
RSI = 100 - (100 / (1 + RS)), where RS = Average Gain / Average Loss over n periods (typically 14)
š” Example
If Bitcoin's RSI drops to 25, it suggests the selling pressure has been intense and the price might be due for a bounce. However, in strong downtrends, RSI can stay oversold for extended periods.
How to Use RSI
- 1Identifying potential reversal points when RSI reaches extreme levels
- 2Confirming trend strength by watching RSI stay above 50 in uptrends
- 3Spotting divergences between price and RSI for early reversal signals
- 4Setting alert triggers for oversold/overbought conditions
ā” Pro Tips
- ā¢Don't rely on RSI alone - combine with price action and other indicators
- ā¢In strong trends, RSI can remain overbought/oversold for weeks
- ā¢Look for RSI divergence as a stronger signal than absolute levels
- ā¢Use our RSI Oversold screener to find potential buying opportunities
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