What is RSI?
The Relative Strength Index (RSI) is a momentum oscillator developed by J. Welles Wilder in 1978. It measures the speed and magnitude of recent price changes to evaluate overbought or oversold conditions.
RSI oscillates between 0 and 100
14 periods (adjustable)
Above 70 indicates overbought
Below 30 indicates oversold
How RSI Works
RSI compares the average gains to average losses over a specified period. The resulting value tells you whether an asset has been gaining or losing value more aggressively.
RSI Formula
RSI = 100 - (100 / (1 + RS))Where RS = Average Gain / Average Loss
Reading the Chart
- Candlesticks (Price): Green = bullish, Red = bearish candles
- Purple line (RSI): RSI oscillator (0-100)
- Red zone (>70): Overbought territory
- Green zone (<30): Oversold territory
RSI Levels Explained
Asset may be overvalued. Consider taking profits or waiting for pullback before buying.
- 80+ = Extremely overbought
- Look for divergence signals
- Don't short immediately - wait for confirmation
No extreme readings. Use other indicators for direction.
- 50 = centerline (equilibrium)
- Above 50 = bullish momentum
- Below 50 = bearish momentum
Asset may be undervalued. Potential buying opportunity if fundamentals support.
- 20 or below = Extremely oversold
- Look for bullish divergence
- Wait for RSI to cross back above 30
RSI Trading Strategies
RSI Divergence
When price makes new highs/lows but RSI doesn't confirm, it signals potential reversal.
Overbought/Oversold Reversals
Wait for RSI to exit extreme zones, then enter in the direction of the cross.
RSI Trend Confirmation
Use RSI 50 centerline to confirm trend direction.
📊 RSI Cheat Sheet
| RSI Value | Condition | Action | Confirmation |
|---|---|---|---|
| 80+ | Extremely Overbought | Consider selling / Take profit | Wait for RSI < 70 |
| 70-80 | Overbought | Caution on new longs | Look for divergence |
| 50-70 | Bullish Momentum | Trend following longs | RSI above 50 |
| 50 | Neutral / Centerline | Wait for direction | Watch for cross |
| 30-50 | Bearish Momentum | Trend following shorts | RSI below 50 |
| 20-30 | Oversold | Watch for reversal | Wait for RSI > 30 |
| 0-20 | Extremely Oversold | High probability bounce | Bullish divergence |
⚠️ Common RSI Mistakes
Buying solely on oversold
In strong downtrends, assets can stay oversold for weeks. Wait for confirmation.
Shorting at 70
Strong uptrends can have RSI above 70 for extended periods. Don't fight the trend.
Ignoring timeframes
RSI on 1m chart vs daily chart tells different stories. Use multiple timeframes.
Using RSI alone
RSI works best combined with price action, volume, and other indicators.
Find Oversold Opportunities Now
Our RSI Heatmap scans 2500+ cryptocurrencies in real-time to find the best oversold setups.
Frequently Asked Questions
What RSI number means oversold?
An RSI below 30 is traditionally considered oversold, suggesting the asset may be due for a bounce. In strong downtrends, RSI can stay below 30 for extended periods, so don't blindly buy at 30 — wait for RSI to cross back above 30 for confirmation.
What is the best RSI period setting?
The default 14-period RSI works well for most traders on the daily timeframe. Shorter periods like 7 or 9 give more signals but more false positives. Longer periods like 21 provide fewer but more reliable signals. Match the period to your trading style.
Should I use RSI alone for trading?
RSI should not be used in isolation. Combine it with support/resistance levels, volume analysis, and trend direction for higher probability trades. RSI divergence with price action is one of the most powerful combinations.
What is RSI divergence?
RSI divergence occurs when price makes a new high/low but RSI doesn't confirm it. Bearish divergence: price makes higher high, RSI makes lower high. Bullish divergence: price makes lower low, RSI makes higher low. This warns of potential reversals.
Practice Trading with RSI
Mock Trade Challenge
Use RSI readings to make smart trade decisions.
RSI has reached deeply oversold territory at 25, with a massive volume spike. This could signal seller exhaustion...
What would you do here?
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