The Relative Strength Index (RSI) is one of the most popular momentum indicators in trading. Whether you’re into crypto, stocks, or forex, RSI can help you spot when an asset might be overbought, oversold, or showing signs of a trend change.
1. What is RSI?
Range: 0 to 100
Default setting: 14-period RSI
Key Levels: Above 70 → Overbought zone (price may be overheated)
Below 30 → Oversold zone (price may be undervalued)
Around 50 → Neutral, often used to confirm trend direction
2. How Traders Use RSI
A. Overbought & Oversold Zones
Overbought (RSI > 70): May signal a possible pullback, but in strong trends, it can stay overbought for a while.
Oversold (RSI < 30): May signal a bounce, but in strong downtrends, it can remain oversold.
💡 Tip: Many traders wait for RSI to exit the 70/30 zone before taking action.
B. Divergences
Bullish Divergence: Price makes a lower low, RSI makes a higher low → possible upward reversal.
Bearish Divergence: Price makes a higher high, RSI makes a lower high → possible downward reversal.
C. Trend Confirmation
RSI above 50: Bullish momentum.
RSI below 50: Bearish momentum.
Some traders only go long above 50 and short below 50 for better probability.
3. Pro Tips for Using RSI
Shorter periods (e.g., RSI 7) → faster signals but more noise.
Longer periods (e.g., RSI 21) → slower signals but smoother trends.
Combine RSI with support/resistance and price action for stronger setups.
Always use risk management — RSI is a guide, not a crystal ball.
✅ Bottom line:
RSI is a powerful tool, but it works best when combined with other indicators and solid trading discipline. Don’t just trade because RSI hits 70 or 30 — look at the bigger picture.
