Relative Strength Index (RSI)
technical indicators ÔÇó price action ÔÇó chart signals
Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of recent price changes to identify overbought or oversold conditions in a market. Ranging from 0 to 100, RSI helps traders determine whether an asset is trending too aggressively in one direction, signaling potential reversal or consolidation points. Readings above 70 typically indicate overbought conditions, while readings below 30 suggest oversold conditions.
Use Case: A trader exits a long position when the RSI crosses above 70, anticipating a trend slowdown and potential price correction.
Key Concepts:
- Trend Exhaustion Indicators ÔÇö Tools for spotting weakening momentum in price trends
- Support Levels ÔÇö Zones where oversold conditions may stabilize price
- Resistance Levels ÔÇö Areas where overbought conditions often trigger reversals
- Volume Divergence ÔÇö Confirms RSI signals by showing weakening trend strength
Summary: RSI is a core momentum indicator for detecting when market trends are overextended. It helps traders time entries and exits by signaling when buying or selling pressure is unsustainable.
| Feature | Traditional | Web3 |
|---|---|---|
| Primary Use | Stocks and forex to identify overbought or oversold zones | Applied to crypto charts for timing exits during rapid bull runs |
| Confirmation | Combined with candlestick patterns or moving averages | Integrated with on-chain volume or liquidity divergence |