Recently, many friends have asked me how to interpret RSI.

Actually, this indicator looks complicated, but it’s not difficult to use once you understand it.
Today I want to share my understanding with everyone.

RSI, simply put, is a tool to measure the strength of price increases and decreases over a period of time.
For example, if BTC rises 5% over 9 days, RSI can not only show the magnitude of the increase but also reveal the rhythm of the upward trend at different points within those 9 days—whether it’s a slow rise or a rapid surge.
Basically, it reflects the comparative strength of buyers and sellers at different times.

When it comes to how to read RSI, the most important thing is to understand those three lines.
Generally, the white line represents the 6-day moving average (most sensitive to short-term changes),
the yellow line is the 12-day moving average (medium-term reference),
and the purple line is the 24-day moving average (long-term trend).
My personal habit is to first look at the interaction between the 6-day and 12-day lines, then confirm the overall direction with the 24-day line.

In actual trading, my most common judgment method is this:
When both the 6-day and 12-day lines are below 50 and suddenly break above 50 together, it indicates increasing bullish strength, and you might consider gradually building a position.
Conversely, if both lines rise above 80 at the same time, be cautious, as the price may have already peaked, and it might be time to reduce holdings.

Regarding golden crosses and death crosses,
when the short-term line crosses above the medium-term line, forming a golden cross, it’s usually a buy signal;
when it crosses below, forming a death cross, it’s time to consider selling.
However, I want to emphasize that these signals are best used in conjunction with candlestick patterns, as relying solely on RSI can lead to pitfalls.

RSI’s calculation is actually quite straightforward.
Suppose over 14 days, there are 9 days of gains with a total increase of 28%,
which averages about 2% per day;
and 5 days of declines with a total decrease of 7%,
averaging about 0.5% per day.
Using the formula, the RSI value is approximately 66.7.
This number ranges from 0 to 100—closer to 100 indicates a strong upward momentum,
closer to 0 indicates a strong downward momentum.

My biggest concern when using RSI is the “numbing” phenomenon,
which means the indicator gets stuck in extreme zones and stops moving.
This often happens in one-sided markets, especially during continuous surges or drops,
making RSI less reliable as a reference.
So my advice is to wait and watch when this occurs, rather than blindly chasing trades.

Divergence is also worth paying attention to.
For example, if the price hits a new high but RSI moves downward, it’s called a bearish divergence, often signaling a potential reversal of the uptrend.
Conversely, if the price hits a new low but RSI moves upward, it indicates a possible weakening of the downtrend.
However, in extreme one-sided markets, divergence signals can also fail, so it’s best to combine with other indicators.

For advanced ways to interpret RSI, I usually combine it with candlestick patterns.
For example, in sideways trading zones, if the candlesticks reach previous resistance or support levels, and RSI also hits high or low points,
then if a hammer or hanging man pattern appears, the accuracy of the signal increases significantly.

Finally, a reminder: although RSI is useful, don’t rely on it as the sole basis for decision-making.
I usually consider volume, candlestick trends, support and resistance levels, and other factors to make a comprehensive judgment,
which helps reduce risk.
Relying solely on RSI can easily lead to being caught off guard by the market.

So, regarding how to read RSI, the core is understanding that it reflects the balance of buying and selling strength,
learning to interpret the interaction of the three lines, recognizing overbought and oversold zones,
and combining it with other tools for flexible application.
Only then can you truly utilize this indicator effectively.