RSI (Relative Strength Index) is a momentum oscillator developed by J. Welles Wilder in 1978 that measures the speed and magnitude of recent price changes to identify overbought and oversold conditions. Displayed as a line oscillating between 0 and 100, RSI is one of the most versatile and widely used indicators in crypto trading — appearing on virtually every professional trader’s chart.
Key RSI levels and signals: Above 70 (Overbought) — price has risen rapidly and may be due for a pullback or consolidation; Below 30 (Oversold) — price has fallen sharply and may be due for a bounce or reversal; Midline (50) — above 50 suggests bullish momentum, below 50 bearish; RSI Divergence (the most powerful signal) — when price makes a higher high but RSI makes a lower high (bearish divergence), or price makes a lower low but RSI makes a higher low (bullish divergence), signalling momentum exhaustion and potential reversal.
Important nuances: in strong bull markets, RSI can remain “overbought” (above 70) for extended periods — selling purely on RSI >70 in a bull run is a costly mistake. Similarly, RSI can stay oversold in sustained downtrends. RSI works best as a confirmation tool alongside support/resistance levels and trend analysis, not as a standalone signal.
Example: Ethereum’s daily RSI drops to 28 (oversold) while price tests the $2,800 support zone — a level that has held three times before. A trader interprets this RSI + support confluence as a high-probability long setup, entering with a stop below $2,700 and targeting $3,300.
Learn more: Investopedia — RSI Indicator Guide
