Technical Indicator Practical Course Lesson 5: "RSI—Relative Strength Index" ends here. We have thoroughly reviewed RSI from basic concepts to practical applications, from parameter optimization to multi-indicator collaboration.

1. What did we learn today?
1. The essence of RSI: The percentage comparison of bullish and bearish forces

RSI ranges between 0-100, with 50 as the dividing line between bullish and bearish. Above 50 indicates strong bulls, below 50 indicates strong bears. It does not predict price movement, only tells you whether the market is hot or cold right now.

2. Three core values

70/30 (traditional threshold): Overbought/Oversold, but due to high volatility in crypto markets, adjust to 80/20 or even 85/15.

80/20 (commonly used in crypto): RSI > 80 indicates extreme overbought, caution for pullback; RSI < 20 indicates extreme oversold, possible rebound.

50 (bull/bear dividing line): RSI > 50 means only long positions; < 50 means only short positions. Breaking above or below 50 signals trend reversal.

3. The trump signal: Divergence

Top divergence: Price makes a new high, RSI does not → upward momentum wanes, prepare to short or reduce positions.

Bottom divergence: Price makes a new low, RSI does not → downward momentum wanes, prepare to go long or bottom fish.

Multi-timeframe divergence (1 hour + 4 hours + daily), high probability of reversal.

4. Other classic patterns

Trendline breakout: RSI trendline breakout often leads price, providing early warning.

Double line golden/death cross: Fast line (6-day) crossing above slow line (12-day) is a buy signal (golden cross); crossing below is a sell signal (death cross).

RSI patterns: Double top, double bottom, head and shoulders top are also effective on RSI.

5. Multi-indicator collaboration

+MACD: MACD determines trend, RSI finds overbought/oversold and divergence. Double divergence signals are very strong.

+Bollinger Bands: Price touching lower band + RSI < 30 buy; touching upper band + RSI > 70 sell.

+Volume: RSI signals must be confirmed with volume increase; shrinkage volume means abandon.

6. Parameter optimization and asset adaptation

Short-term (1 hour / 15 min): RSI(7) more sensitive

Swing trading (4 hours): RSI(14) default

Long-term (daily/weekly): RSI(21) or (28) for smoother signals

Bitcoin/Ethereum: default 14-period works well

Altcoins (high volatility): shorten to 7-9, and raise overbought threshold to 80

7. Common pitfalls and traps

❌ Using RSI counter-trend in a trending market (bull market RSI long-term overbought, a drop triggers panic) → switch to trend indicators or wait for pullback.

❌ Selling immediately when RSI hits 70 or buying at 30 → wait for a trend reversal confirmation.

❌ Ignoring volume → RSI signals without volume are unreliable.

❌ Rigid parameters → adjust dynamically for different coins and timeframes.

二、Core Principles (Mnemonic)
RSI gauges strength and weakness, seventy overbought, thirty oversold.
Fifty is the midline dividing bullish and bearish, avoid trading against the trend.
Bottom divergence for bottom fishing, top divergence for topping out.
Combine MACD and Bollinger Bands; volume confirmation makes signals trustworthy.

三、Post-class Homework
Open the Bitcoin 4-hour chart, set RSI(14). Find a clear bottom divergence and top divergence, take screenshots and annotate.

Observe the past week, how many times did RSI cross around 50? Based on price action, judge which crossings are valid.

Use RSI + MACD combo to find 3 buy signals and 3 sell signals on a demo account, record profit and loss.

四、Next Lesson Preview
Volume—the market’s “thermometer,” combining price and volume reveals the true picture.

All technical indicators can deceive, but volume is relatively reliable. Next lesson you will learn:

Four volume-price relationships (price up with volume increase, price up with volume decrease, price down with volume increase, price down with volume decrease)

Authentic vs. fake breakouts (volume increase = real, volume decrease = false)

OBV (On-Balance Volume) and VWAP (Volume Weighted Average Price)

On-chain data tracking of major players (large transfers, exchange net inflows)

RSI is a “stabilizer” among oscillators. Master it, and you can stay calm during market euphoria and spot opportunities during panic. But remember: there is no perfect indicator, only perfect combinations. I am Wang Yibo, see you in the next class!

Wishing your account stays in the green!