What Is the RSI Indicator?

The Relative Strength Index (RSI) is a vital tool for traders, whether in traditional or cryptocurrency markets. Developed in the late 1970s by J. Welles Wilder, it's a momentum oscillator that gauges the speed and magnitude of price movements.

How does it work? RSI measures changes in an asset's price over a specific period (default: 14 periods), creating a scale from 0 to 100. Above 70 means overbought, below 30 suggests oversold conditions. You can tweak settings for sensitivity.

But RSI is not just about overbought and oversold. Traders use it to spot bullish and bearish divergences. Bullish divergence is when RSI rises while the price falls, indicating buying strength during a downtrend. In contrast, bearish divergence suggests a loss of momentum despite price gains.

Remember, RSI isn't foolproof. It's best used alongside other indicators to avoid false signals.

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