RSI

RSI, the Relative Strength Index, is a momentum oscillator that measures the speed and magnitude of recent price changes on a scale from 0 to 100, comparing the size of recent gains to recent losses over a lookback window, typically 14 periods. Readings above 70 are conventionally labeled overbought, meaning the recent advance has been unusually fast, while readings below 30 are labeled oversold, meaning the decline has been unusually fast.

For example, if Bitcoin rallies sharply for two weeks and the daily RSI reaches 82, a trader might tighten stops or wait for a pullback before adding, reasoning that momentum is stretched. Traders also watch divergence: if price makes a new high but RSI makes a lower high, upward momentum is fading even as price rises, which sometimes precedes a reversal.

A common misconception is that overbought means sell and oversold means buy; in strong trends RSI can stay above 70 or below 30 for extended stretches while price keeps running, so acting on the level alone often means fighting the trend. Many traders instead adjust expectations by regime — for instance treating 40 as support for RSI in uptrends — and combine RSI with structure and volume rather than using it mechanically.