Indicators · Momentum · live Bitcoin example
RSI indicator explained: how to read the Relative Strength Index
RSI turns the last 14 candles into one number from 0 to 100. High numbers mean the market has been pushed up hard; low numbers mean it has been pushed down hard. It is one of the most watched indicators in the world – and one of the most misunderstood. Here is how it really works, with a live Bitcoin example.
What Bitcoin’s RSI says right now
Worked out from real Bitcoin candles and refreshed every 30 minutes. It describes what already happened – not what will happen next.
RSI on the live Bitcoin chart
This is the live Bitcoin chart with only RSI switched on – it is the blue line in the panel under the price. The dotted lines are 70 and 30.
What is RSI?
RSI stands for Relative Strength Index. It is a “momentum oscillator”: momentum means how fast and how hard price has been moving, and oscillator means the line swings between two fixed edges – here 0 and 100.
RSI does not care about the price itself. It only compares the size of the recent up moves with the size of the recent down moves. If the last two weeks were mostly big green candles, RSI is high. If they were mostly big red candles, RSI is low. If up and down days were about the same size, RSI sits near 50.
Because it always lives between 0 and 100, RSI lets you compare very different markets. Bitcoin at $100,000 and a currency pair at 1.08 can both have an RSI of 65, and it means the same thing: buyers have had the upper hand lately.
One important detail: the name says “relative strength”, but RSI does not compare one market with another (that is a different idea also called relative strength). It compares a market with its own recent past.
Where it comes from: RSI was created by J. Welles Wilder Jr., an American engineer turned trader, and published in his 1978 book “New Concepts in Technical Trading Systems”. The same book introduced ATR and the Parabolic SAR. Wilder used 14 periods and the 70/30 levels – the settings almost everyone still uses today.
How RSI is calculated
You never need to calculate RSI by hand – every chart does it for you. But knowing the recipe makes it much easier to trust (and to doubt) the number.
- Step 1Average gainAdd up the up moves of the last 14 candles and divide by 14. Down candles count as 0.
- Step 2Average lossAdd up the down moves (as positive numbers) of the same 14 candles and divide by 14.
- Step 3RS = gain ÷ lossRS is the “relative strength”: how much bigger the gains were than the losses.
- Step 4RSI = 100 − 100 ÷ (1 + RS)This squeezes RS into the 0–100 scale.
| Average gain over 14 days | $1.20 |
|---|---|
| Average loss over 14 days | $0.80 |
| RS = 1.20 ÷ 0.80 | 1.5 |
| 1 + RS | 2.5 |
| 100 ÷ 2.5 | 40 |
| RSI = 100 − 40 | 60 |
An RSI of 60 means gains were bigger than losses, but not extreme. If there were no down moves at all, the average loss would be zero and RSI would be exactly 100. After the first 14 candles Wilder updates the averages smoothly: new average = (old average × 13 + today’s move) ÷ 14. This “Wilder smoothing” is why RSI moves calmly instead of jumping.
How to read RSI
The pictures are simple example shapes, so the idea is easy to see. Real charts are messier.
RSI moving into the overbought zone above 70 and the oversold zone below 30. Example drawing, not real data. Above 70 and below 30
Above 70 is called overbought and below 30 oversold. Overbought only means the price has been bought very hard lately. It is a description of the past two weeks, not an order to sell – strong markets can stay overbought for weeks.
Bearish divergence: price makes a higher high while RSI makes a lower high. Example drawing, not real data. Divergence: when RSI disagrees with price
If price makes a new high but RSI makes a lower high, the push behind the move is getting weaker. Traders call this bearish divergence. The opposite – a lower low in price with a higher low in RSI – is bullish divergence. Divergence can last a long time before anything happens.
In a strong uptrend RSI often stays between 40 and 80 and rarely reaches 30. Example drawing, not real data. The trend changes the “normal” range
In a strong uptrend RSI often swings between about 40 and 80 and rarely touches 30. In a downtrend it often swings between about 20 and 60. So a dip to 40 in an uptrend can be as meaningful as a dip to 30 in a sideways market.
The 50 line
Many traders simply ask: is RSI above or below 50? Above 50 means gains have outweighed losses over the period; below 50 means the opposite. It is a quick way to see which side has had the upper hand.
Common mistakes beginners make
Almost everyone makes these at first. Knowing them saves a lot of frustration.
- Selling just because RSI is above 70Overbought is not a top. In strong rallies RSI can stay above 70 while the price keeps climbing. Many traders wait for RSI to turn back down, or for the price to break a level, before they pay attention.
- Treating 30 as a guaranteed bounceIn a crash RSI can drop to 20 or even 10 and stay there. Oversold says sellers have been very strong, and strong sellers do not always stop on time.
- Using RSI aloneRSI only looks at closing prices. It knows nothing about support and resistance, volume or news. It works best as one piece of the picture.
- Changing the settings until it “works”Shrinking RSI to 2 or 5 periods makes it flash signals constantly. It looks great on a few past examples and badly on the next ones.
Settings most people use
The numbers in brackets you see on charts – explained in plain words.
- Length14 candlesWilder’s original setting and the default almost everywhere. On a daily chart that means the last 14 days.
- Levels70 and 30The classic lines. Some traders use 80 and 20 for very volatile markets like small coins, so only the most extreme readings stand out.
- Time frameDaily or 4-hourDaily RSI is the most quoted. Short time frames (5–30 minutes) change fast and are noisier.
How to use RSI (for beginners)
Six small steps. None of them tells you to buy or sell – they help you read the chart.
- 1Find the 50 line firstAbove 50: gains have been bigger lately. Below 50: losses have been bigger.
- 2Check for extremesAbove 70 or below 30 tells you a move has been unusually strong – nothing more.
- 3Look at the trendIn an uptrend, watch dips toward 40. In a downtrend, watch bounces toward 60.
- 4Compare with priceNew price high but lower RSI high? The push may be fading. Write it down and watch.
- 5Add a second toolCheck support and resistance or volume before you decide anything.
- 6Remember the limitsRSI describes the last 14 candles. News can change everything in minutes.
See RSI on other markets
Indicators work the same way on crypto, gold, currencies and stocks. Open any live Kumo chart and press the button.
Learn next
These go well together with this lesson.
- Stochastic oscillatorWhere today’s price sits inside its recent high–low range, from 0 to 100.
- MACDTwo averages chasing each other – it shows when a move speeds up or slows down.
- Support and resistanceThe price “floors” and “ceilings” where buyers or sellers stepped in before.
Free Kumocast tools:Bitcoin RSI on every time frameBitcoin technical analysis
RSI FAQ
What does RSI stand for?
Relative Strength Index. It compares the size of recent up moves with recent down moves and shows the result on a scale from 0 to 100.
What is a good RSI number?
There is no good or bad number. Around 50 means balance, above 70 means the market has been bought very hard and below 30 means it has been sold very hard. What matters is the context: the trend, the time frame and the price levels nearby.
Is RSI a leading or lagging indicator?
RSI is calculated from past prices, so it describes what already happened. Divergence can sometimes show a move losing strength before the price turns, which is why some people call it leading – but it gives plenty of early warnings that never come true.
What is the best RSI setting for day trading?
Most day traders keep the standard 14 and change the time frame instead (for example 5-minute or 15-minute candles). Shorter RSI lengths react faster but give many more false alarms.
What is the difference between RSI and the stochastic oscillator?
RSI compares the size of up and down moves. The stochastic compares the close with the highest high and lowest low of the period. Both go from 0 to 100, but the stochastic is faster and jumps around more.
Can RSI predict the price?
No indicator can. RSI tells you how strong the recent moves were. Traders use it to judge whether a move looks stretched, not to know the future.
Who invented RSI?
J. Welles Wilder Jr. He published it in 1978 in his book “New Concepts in Technical Trading Systems”, together with other indicators such as ATR and the Parabolic SAR.
All indicator lessons
Free, plain-word lessons, each with a live Bitcoin example.
- Support and resistanceThe price “floors” and “ceilings” where buyers or sellers stepped in before.
- Moving averages (SMA vs EMA)A smooth line through the price that shows which way the trend is going.
- VolumeHow much was traded – it tells you how many people stand behind a move.
- EMA 200The famous long-term trend line: above it the big picture is up, below it down.
- MACDTwo averages chasing each other – it shows when a move speeds up or slows down.
- Bollinger BandsA stretchy band around the price that shows normal and unusual moves.
- Stochastic oscillatorWhere today’s price sits inside its recent high–low range, from 0 to 100.
- Ichimoku cloudThe Japanese “cloud” chart – Kumo’s namesake – showing trend, levels and momentum at once.
Written by
Alex Wu
Crypto, DeFi, perps and FX · driven by data
Alex designed the Kumocast model behind these signals, sets its rules, reviews its accuracy record and updates the methodology whenever the model changes. Signals are refreshed every 30 minutes with live market data.