What is RSI and How to Apply it to Crypto Trading?

RSI means Relative Strength Index - a super popular momentum oscillator. Traders love it. It shows how fast prices move for an asset. Crypto folks use it all the time. Maybe one of the best technical tools out there.

New traders often gravitate to this indicator first. Makes sense. It's reliable. It measures momentum and tells you if something's overbought or oversold. You could build a pretty decent strategy with it.

What's RSI Anyway?

Crypto investors are big on technical analysis. They need to predict where prices might go. They use various indicators for this. Beyond news and economic data, prices get pushed around by market trends too.

Financial stuff and crypto tend to move in patterns. Kind of interesting. These patterns can be spotted through chart analysis. Most indicators look backward to guess forward.

RSI is a technical tool in the momentum oscillator family. It signals if markets are too hot or too cold.

J. Welles Wilder created it back in 1978. The scale runs 0 to 100. It typically looks at 14 periods, but you can tweak that. Not set in stone.

You can check RSI across different timeframes - weeks, days, hours, even minutes. It's everywhere now. Every platform has it. The math happens automatically - you just need to understand what the numbers mean.

Where to View RSI in 2025?

Using TradingView

TradingView seems to be sticking around in 2025. To find RSI there:

1. Open your chart
2. Hit "Indicators"
3. Type "RSI"
4. Select it
5. It pops up below your chart

Using Mobile Trading Apps

Trading apps have gotten pretty sophisticated. For RSI:

1. Open chart view
2. Tap "Indicators"
3. Find "RSI"
4. Maybe adjust settings
5. Apply

Using Financial Websites

Sites like Yahoo Finance show RSI too:

1. Find your asset
2. Go to "Charts"
3. Look for "Technical Indicators"
4. Pick "RSI"

How is RSI Calculated?

The formula's not complicated:

RSI = 100 - [100/ (1 + RS)]

Where:

• RS = Average Gain / Average Loss
• Average Gain = total gain per period
• Average Loss = total loss per period

RS compares upward and downward price changes. RSI bounces between 0 and 100.

Default setting is 14 periods. Daily chart? Last 14 days. Weekly? Last 14 weeks. You can change it though. Up to you.

How to Read RSI?

RSI tells you if something's too cheap or too expensive. Below 30? Probably oversold. Above 70? Likely overbought.

Sell Signal: Overbought RSI Indicator

When RSI jumps over 70, prices might've risen too much. Could drop soon.

Buy Signal: Oversold RSI Indicator

RSI under 30? Asset might be undervalued. Might bounce back up.

Reading RSI isn't rocket science. It's pretty straightforward. But it's not perfect. False signals happen. You need experience to tell good signals from bad ones.

Smart traders don't rely on just one indicator. They use several. Makes sense.

RSI isn't just about speed - it also shows convergence and divergence. That's where it gets interesting.

Finding Moving Average Convergence and Divergence Through RSI

Convergence

Convergence happens when price and RSI move together. If price makes lower lows while RSI makes higher lows - that's convergence.

Divergence

Divergence is when they move opposite ways. Price goes up, but RSI goes down? That's divergence.

Convergence and Divergence: Explained

Think about a market at its peak. Price pulls back slightly but makes a new high. Meanwhile, RSI shows less strength. Not entirely clear why immediately.

It's like real life - when prices rise too much, fewer people buy. Sellers drop prices to attract buyers. In charts, weak RSI with rising price suggests fewer buyers despite higher prices. Bull trend might reverse soon.

Same works in reverse. Prices falling but RSI strengthening? Price might climb soon. Look for these pattern breaks. Then bet on the change.

How to Apply RSI in Crypto Trading

RSI signals work better on higher timeframes. Kind of surprising, but true. A signal on a 4-hour chart beats one on a 15-minute chart.

You might see bullish divergence on smaller timeframes that doesn't appear on larger ones. Stick with the standard 14 period setting, at least at first. Lots of trading strategies incorporate RSI signals.

In Summary

RSI is pretty much a go-to indicator, especially for day and swing traders. It gives you a window into market conditions and hints at what move might make sense next.