Relative Strength Index (RSI)

RSI belongs to a class of chart tools called momentum oscillators, calculated by comparing the average size of a coin's recent up moves against its average down moves over a chosen lookback window, almost always 14 periods on a given timeframe. The result is plotted as a single line that swings between 0 and 100, giving traders a quick visual read on whether buying or selling pressure has been dominant lately.

The indicator was created by mechanical engineer turned commodities trader J. Welles Wilder Jr., who introduced it in his 1978 book New Concepts in Technical Trading Systems alongside other tools like the Average True Range and Parabolic SAR. It predates crypto by decades but has become a staple of technical analysis on exchanges and charting platforms because it works the same way on any liquid, actively traded market.

Beyond the basic 70/30 overbought and oversold thresholds, traders watch for RSI divergence: when price prints a new high or low that the RSI line fails to confirm, it can signal fading momentum ahead of a reversal. Because crypto assets are volatile and can stay pinned above 70 or below 30 for extended stretches during strong trends, many traders widen their thresholds to 80/20 or require confirmation from volume or a second indicator like MACD before acting.

RSI is a lagging, historically-based signal, not a prediction, so it works best combined with support and resistance levels and other confirming evidence rather than traded in isolation.