Key Points
- The Relative Strength Index (RSI) is a momentum indicator that measures the speed and strength of recent price moves on a 0 to 100 scale.
- RSI overbought oversold levels are commonly: 70 for overbought and 30 for oversold, but these levels behave differently in trends.
- The RSI indicator in crypto is best used with trend context… RSI can stay overbought in strong uptrends and oversold in strong downtrends.
- To use RSI in crypto properly, focus on momentum shifts, failed swings, and how RSI reacts at key support and resistance zones.
- RSI divergence crypto meaning is simple: price makes a new high or low, but RSI fails to confirm, which can signal weakening momentum.
- Best RSI settings for crypto are usually the default 14, but changing settings should match your timeframe, not a desire to “fit” the past.
- If any terms feel unfamiliar, use the Crypto Glossary for quick definitions, then return to this lesson.
Quick Answer
The Relative Strength Index (RSI) is a momentum indicator that ranges from 0 to 100 and is used to assess whether momentum is strengthening or fading. RSI overbought oversold levels are often 70 and 30, but in crypto those levels can persist during strong trends, so RSI works best when combined with trend direction and key support and resistance. RSI divergence happens when price makes a new high or low but RSI fails to confirm, which can signal weakening momentum and a higher chance of a pause or reversal.
Where This Lesson Fits
Lessons 1 to 12 built the technical analysis foundations, including trend, moving averages, and volume confirmation. Lesson 13 begins the next module by introducing momentum indicators, starting with the Relative Strength Index (RSI), so you can measure momentum shifts instead of guessing them from candles alone.
This lesson is part of the Technical Analysis for Beginners series. For the full lesson map and all supporting guides, visit the Technical Analysis for Beginners Hub.
What Is The Relative Strength Index (RSI)?
RSI is a momentum oscillator. It measures how strongly price has been rising or falling recently.
Relative Strength Index (RSI) definition:
- it compares average gains vs average losses over a set period
- it outputs a number between 0 and 100
- higher RSI suggests stronger recent upward momentum
- lower RSI suggests stronger recent downward momentum
RSI does not tell you fundamentals. It tells you about momentum behaviour.
RSI Indicator Crypto, What It Is Good For
RSI is most useful when you treat it as a momentum tool.
RSI helps you:
- spot momentum strengthening or weakening
- see whether pullbacks are shallow or heavy
- compare momentum across swings
- recognise when price is extended relative to recent movement
It is not a standalone “buy” or “sell” button.
RSI Overbought Oversold Levels
The most common RSI levels are 70 and 30.
Typical rules are:
- RSI above 70 is called overbought
- RSI below 30 is called oversold
But those words mislead beginners, because they sound like reversal guarantees.
The better interpretation is:
- above 70 suggests strong momentum, sometimes stretched
- below 30 suggests weak momentum, sometimes stretched
How RSI Behaves In Trends
This is the main RSI lesson most people learn too late.
In an uptrend: RSI can stay above 50 and reach 70 repeatedly without the market topping.
In a downtrend: RSI can stay below 50 and reach 30 repeatedly without the market bottoming.
So if you treat “overbought” as “must drop now”, you will get chopped up.
A practical trend filter is:
- RSI holding above 50 often supports bullish momentum
- RSI holding below 50 often supports bearish momentum
This is not perfect. It is a useful lens.
How To Use RSI In Crypto
Here are three ways to use RSI that make sense for beginners.
1) Use RSI As A Momentum Confirmation Layer
Combine RSI with what you already learned in earlier lessons.
Check:
- trend state from Lesson 8
- key support and resistance from Lesson 6
- volume behaviour from Lesson 12
Then look at whether RSI is confirming the direction.
A simple reading is:
- price pushing up into resistance with rising RSI supports momentum
- price pushing up into resistance with falling RSI can warn of fading momentum
2) Use RSI Overbought Oversold Levels With Context
Use 70 and 30 as reference points, not rules.
A better question is:
- does RSI get overbought while price is breaking out and holding levels?
- or does RSI get overbought into resistance and then fail to hold?
The first case can still be trend continuation. The second case can be exhaustion.
3) Use RSI Divergence As A Warning, Not A Verdict
RSI divergence is one of the most searched RSI concepts, but it is misunderstood.
RSI Divergence Crypto Meaning
Divergence is when price and RSI disagree.
Bullish divergence:
- price makes a lower low
- RSI makes a higher low
This can suggest selling momentum is weakening.
Bearish divergence:
- price makes a higher high
- RSI makes a lower high
This can suggest buying momentum is weakening.
Divergence does not guarantee reversal. It signals risk of a pause or a turn, especially near key levels.
Best RSI Settings For Crypto
Most traders use the default RSI setting of 14.
Best RSI settings for crypto depend on:
- your timeframe
- how quickly you want RSI to react
- whether you want smoother signals or faster signals
A practical beginner approach is:
- start with RSI 14
- learn how it behaves in trends and ranges
- only adjust settings if you can explain why
If you change settings to “make the past look good”, it will usually fail in real time.
Common RSI Mistakes Beginners Make
- treating overbought as “must sell” and oversold as “must buy”
- ignoring trend direction and key support and resistance
- relying on divergence without any confirmation
- changing RSI settings constantly
- using RSI to predict tops and bottoms instead of reading momentum
A simple rule is: RSI is best used to describe momentum… not to make promises about the future.
Mini FAQs
What is the Relative Strength Index (RSI)?
The Relative Strength Index (RSI) is a momentum indicator that ranges from 0 to 100 and measures the strength of recent gains versus losses.
How do you use RSI in crypto?
Use RSI to confirm momentum, read whether RSI holds above or below 50 in trends, and use overbought and oversold levels as context rather than reversal rules.
What are RSI overbought and oversold levels?
Common levels are 70 for overbought and 30 for oversold, but these can persist in strong trends, so context matters.
What is RSI divergence in crypto?
RSI divergence is when price makes a new high or low but RSI fails to confirm, suggesting momentum may be weakening and a pause or reversal risk is rising.
What are the best RSI settings for crypto?
Many traders use RSI 14. The best setting depends on timeframe and desired sensitivity, but consistency matters more than chasing perfect settings.
Is RSI good for beginners?
Yes, if it is used as a momentum tool and combined with trend direction and key levels, not treated as a standalone signal.
Next Lesson
In this lesson you learned what the Relative Strength Index (RSI) is, how to use RSI in crypto with trend context, what RSI overbought oversold levels actually mean, and how to interpret RSI divergence without treating it as a guarantee.
Next, Lesson 14 covers the Moving Average Convergence Divergence (MACD), another momentum tool that helps you read trend strength and momentum shifts through moving average relationships.
For the full lesson map and all supporting guides, visit the Technical Analysis for Beginners Hub.
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Momentum… understood properly.
Legal And Risk Notice
This content is for education and information only and should not be considered financial, legal, or tax advice. Crypto assets are volatile and high risk. You are responsible for your own research and decisions, and you should consider seeking independent professional advice where appropriate.
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