RSI (Relative Strength Index)
In simple terms
RSI is a tool that tells you if a crypto price has been climbing too fast (and might be due for a pullback) or falling too fast (and might be ready to bounce back). Think of it like a speedometer for price momentum—when it's in the red zone, slow down.
Definition
Momentum oscillator (0-100) measuring overbought (>70) or oversold (<30) conditions.
In depth
RSI is a momentum oscillator that quantifies the magnitude of recent price changes on a scale of 0-100 by comparing average gains to average losses over a fixed period (typically 14 candles). It calculates relative strength as the ratio of average up-closes to average down-closes, then normalizes this into the RSI formula: RSI = 100 − (100 / (1 + RS)). Readings above 70 signal overbought conditions where selling pressure may intensify, while readings below 30 indicate oversold conditions where buying pressure may emerge, though RSI can remain in extreme territory during strong trending markets.
How does RSI (Relative Strength Index) work?
RSI compares the size of recent gains to the size of recent losses. Over a lookback window — 14 periods by default — the calculation averages the up-closes and the down-closes separately, using Wilder's smoothing so each new period updates the running averages rather than recalculating from scratch. It divides average gain by average loss to get relative strength, then converts that ratio onto a 0-100 scale using 100 minus 100 divided by (1 plus RS). Readings above 70 and below 30 are conventional markers, not instructions; the number describes momentum that has already happened.
An example
Over 14 days an illustrative token closes higher on nine of them, gaining $18 in total, and lower on five, losing $6 in total. The average gain is $18 divided by 14, about $1.29; the average loss is $6 divided by 14, about $0.43. Relative strength is 3, so RSI equals 100 minus 100/4, which is 75. That sits above the conventional 70 line — a description of recent momentum, not a forecast.
Figures are illustrative only.
What beginners get wrong
- Treating 70 as a sell trigger and 30 as a buy trigger; in a sustained trend RSI can stay pinned above 70 for weeks.
- Shortening the lookback from 14 to 5 produces far more crossings of those levels, which looks like more signal but is mostly noise.
- RSI readings are not comparable across timeframes: a 4-hour chart and a daily chart can show opposite extremes on the same asset.
- Divergence between price and RSI is a description, not a guarantee; prices frequently continue in the same direction afterwards.
Related terms
Part of
What is technical analysis, and how are crypto charts read? — the subject page for technical analysis, with all 29 of its definitions in one place.
Educational only — not financial advice.