What is the RSI?

The price is rising, but does it still have steam? That’s the question the RSI, short for Relative Strength Index, helps you approach. Think of it as a gauge of a move’s intensity, not as a GPS that knows where the market will turn.

Its calculation compares the average size of upward moves with that of downward moves, with smoothing. The most common setting is 14 periods: on a daily chart that means daily changes, while on an hourly chart it means hourly ones. Despite the “relative strength” in its name, it doesn’t compare Bitcoin with some other coin.

Readings above 70 are usually described as the overbought zone and below 30 as the oversold zone. These labels describe strong recent upward or downward momentum. They don’t prove that a crypto is expensive or cheap based on its actual value.

Why it matters

The RSI helps you read a move beyond whether the price is simply green or red. For example, if the price makes a higher high but the RSI makes a lower one, that’s a bearish divergence: according to the indicator, the rise comes with weaker momentum. This can suggest the move is losing strength, without guaranteeing a reversal.

We see the RSI as a useful complementary tool, alongside the trend, trading volume and support and resistance levels. On its own, it gives only part of the picture.

What to watch out for

The main trap is reading “overbought” as “about to fall.” In a strong uptrend, the RSI can stay above 70 for a long time. Likewise, a reading below 30 doesn’t put a floor under a decline.

Also, the time frame changes the picture. The RSI can be low on the hourly chart and high on the daily, with no contradiction. It’s based on past price changes, not on information about the future, and a divergence may never lead to the reversal someone is waiting for.