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RSI (Relative Strength Index)

RSI (Relative Strength Index) is an oscillator from 0 to 100 that shows the strength of price moves. It is usually calculated from 14 candles: above 70 is considered overbought, below 30 oversold.

Skenuok.lt teamPublished 3 min read

The price rises, and in the RSI panel the line climbs above 70 to 78.
Example: After several big green candles RSI rose to 78: the rally is strong but already stretched.

How RSI is calculated

RSI was described by J. Welles Wilder in 1978. It compares the average gain with the average loss over a chosen period, most often 14 candles. If price mostly rose during that time, RSI moves towards 100; if it mostly fell, towards 0. A reading around 50 means gains and losses are roughly balanced.

RSI does not show price, it shows the strength of the move, and it swings between 0 and 100. That is why it counts as an oscillator and is usually drawn in a separate panel below the price chart.

What 70 and 30 mean

  • Above 70: price has risen fast and the zone is called overbought. It warns that the move is stretched, it is not a command to sell.
  • Below 30: price has fallen fast and the zone is called oversold. A bounce is possible but not guaranteed.
  • Around 50: balance. In an uptrend RSI often stays above 50, in a downtrend below it.
TipIn strong trends some traders shift the bands: in an uptrend RSI often holds around 40-50, in a downtrend it tends to stall around 50-60.

Real example: BTC in November 2024

On 6 November 2024 the daily RSI of BTC/USDT rose above 70 as price closed at 75,572. Anyone reading that as a sign the rally was over would have been wrong: RSI stayed above 70 for almost three weeks, and on 22 November price reached 99,588. In a strong trend, overbought can last a long time.

BTC/USDT daily chart from October to the end of December 2024. The period when RSI was above 70 is marked, while price kept rising from 75,572 to 99,588.
BTC/USDT, 1D, 2024-10-01 to 2024-12-31, Binance data. The chart shows price candles only; the RSI (14) values were calculated from daily closes. Not investment advice.

Common mistakes

  • Selling only because RSI is above 70, or buying only because it is below 30. One indicator without context is too weak a basis.
  • Ignoring the trend. In a rising market RSI sits high more often, in a falling one low.
  • Mixing timeframes. The 15 minute RSI and the daily RSI can say opposite things.
  • Changing the period until the indicator "confirms" a decision you have already made.

How to practise

Open the daily BTC chart and find five places where RSI crossed 70 or 30. For each, note what price did after 5 and after 20 candles. Then look for divergences: price makes a new high while RSI does not. How RSI fits with levels and structure is covered in Technical analysis for crypto.

RiskThis content is for education only and is not financial or investment advice. Crypto trading carries a high risk of loss. We do not promise profits.

Frequently asked questions

Which RSI setting is most common?
14 periods, as Wilder described it. A shorter period reacts faster but gives more false readings. The exact number matters less than using one setting consistently.
Does RSI above 70 mean price will fall?
No. It means price has risen fast recently. In a strong trend RSI can stay above 70 for a long time, as BTC did in November 2024.
How is RSI different from MACD?
RSI measures the strength of gains and losses on a fixed 0 to 100 scale. MACD shows the gap between two moving averages and has no upper limit. Many traders use them together.

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Related terms

Overbought and oversoldOverbought: price rose so fast it may pull back (RSI above 70); oversold: it fell so fast it may bounce (RSI below 30). It is a warning, not a...DivergenceWhen price and an indicator disagree, e.g. price falls below its previous low but RSI does not. It is a sign the move is losing strength.MACDMACD (Moving Average Convergence Divergence) is a momentum indicator built from the difference between two moving averages. It has the MACD line,...OscillatorAn indicator that moves between fixed limits, like RSI from 0 to 100. It sits in a separate panel and helps you see whether a move is overheated.Moving average (MA, SMA, EMA)A moving average is the average price over a chosen number of periods, drawn as a line on the chart. SMA weights all candles equally, EMA gives...MomentumHow strongly and quickly price moves in one direction. Long bodies and sharp moves show strong momentum, while shrinking candles show it is fading.