What Is RSI? The Relative Strength Index, Explained

RSI — the Relative Strength Index — is a momentum indicator that scores recent price action on a scale of 0 to 100. It answers one question: how fast and how far has price moved lately, relative to itself? It's one of the most-used indicators in trading, and one of the most misused.

How RSI works

RSI compares the size of recent gains to recent losses over a lookback period (the default is 14 candles) and maps the result onto a 0–100 line below your chart:

• Above 70 — conventionally "overbought" (strong recent buying).
• Below 30 — conventionally "oversold" (strong recent selling).
• Around 50 — balanced momentum.

What overbought and oversold really mean

This is where most beginners go wrong: overbought is not a sell signal, and oversold is not a buy signal. In a strong trend, RSI can stay pinned above 70 (or below 30) for a long time while price keeps going. All "overbought" tells you is that momentum has been one-sided recently — which in a real trend is exactly what you'd expect.

Divergence: RSI's most useful signal

RSI earns its keep spotting divergence — when price and momentum disagree:

• Bearish divergence — price makes a higher high, but RSI makes a lower high. The rally is running on weaker momentum; a pullback becomes more likely.
• Bullish divergence — price makes a lower low, but RSI makes a higher low. Selling is losing steam.

Divergence is a warning, not a trigger — it says momentum is fading, not that the turn is now.

Using RSI well

• Confirm, don't decide — read price and trend first, use RSI to support the read.
• Respect the trend — don't fade a strong trend just because RSI is extreme.
• One is enough — RSI plus clean price reading beats a screen full of indicators.

New to the charts RSI sits on? Start with How to read crypto charts and candlestick charts.